Govt withdraws US$ 490 million from Petroleum Fund

Govt withdraws US$ 490 million from Petroleum Fund

ILI, 15 may 2021 (TATOLI) – The Government of Timor-Leste, through the Ministry of Finance, has already made withdrawals from the Petroleum Fund, from the Central Bank of Timor-Leste, in a total amount of US$490 million.

This is the second withdrawal made by the Ministry of Finance, 190 million USD which brings the total withdrawals in may 2023 to US$490 from the US$1.3 billion State Budget approved by the National Parliament.

“The total petroleum inflows for the quarter were $332.2 million, while the withdrawal of US$190 million was made to finance the budget, adding to a total year-to-withdrawal of 490 million,’’Filipe Nery Bernardo, Coordinator, Petroleum Fund  of Ministry of Finance, told journalists at Minister of the finance office, Aitarak Laran, Monday.

He said the withdrawal of the US$490 million was below the Petroleum Fund’s Estimated Sustainable Income (ESI) limit, which should not exceed 3% (annually) of estimated petroleum wealth.

Bernardo also explained that the Petroleum Fund’s financial market and investments are divided into liquidity and Growth portfolio. 

The Liquidity portfolio is invested in low-risk assets, namely cash and short-maturity US government blonds, and is designed to match the next three years of expected withdrawals.

The liquidity portfolio returned 0.73% in quarter 2, boosted by higher interest rates. The balance of the liquidity portfolio was $.3.37 billion as of the end of June.

The Growth Portfolio is comprised of fixed interest and equities and aims to earn a higher return over the long run. 

“The growth portfolio returned 1.62% in the second quarter and ended with a balance of $14.15 billion. Fixed interest returned negative 1.25% for the quarter, a reversal of the positive return of 2.61% posted in the previous quarter. Bond yields rose in quarter 2, which means that prices declined. Conversely, equities posted a positive return of 6.79% for the quarter, adding to their gains in quarter one.” he explained.

The fund’s balance grew by 385 million from $17.69 billion in the previous quarter (adjusting for the loan revaluation) to $.18.08 million. 

“The gains this year have helped to partially offset the declines in value in 2022. The total Fund’s returns are 5.0% for 2023, with the liquidity portfolio returning 1.9% and the growth portfolio 6.0%. The Equity The allocation has returned 14.87% for the year to date.”

Therefore, the Fund’s annual return since inception is now 4.13% Equities have generated a return of 9.76% per Annum since being introduced in 2010, while fixed interest’s annual return is about 2% since 2005. Equities are expected to provide a higher return in the long term but are more volatile in the short term.

“In terms of other developments during quarter 2 the Petroleum Fund’s audited financial statements have been completed and submitted to the Parliament in June 2023 and the annual report for 2022 will soon be published.”

So far, The Fund’s investment in Timor Gap EP was independently valued at $561 million as of the end of 2022. The annual decline in value of 20% was due to increased government bond yields and the risk premium. The revised value for the Fund as of the end of 2022 is $ 17.28 billion.

Furthermore, an allocation to US Treasury Inflation-Protected Securities (US TIPS) was implemented in April 2023 TIPS provides the growth portfolio with some protection against the risk of persistently higher-than-expected inflation.

As of 30 June, according to the Central Bank of Timor-Leste report, the Petroleum Fund was $18.075 billion.


Journalist: José Belarmino De Sá

Editor: Nelia B.


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