By: Dionisio Babo Soares (Personal Opinion)
At the Extraordinary Meeting of the Council of Ministers on 30 June 2025, the Government of Timor-Leste approved the Budget Strategy Declaration and the indicative expenditure ceiling for the 2026 General State Budget (OGE 2026). This decision, grounded in the legal framework for public financial management, reflects a desire to maintain macroeconomic stability and responsible fiscal planning. With GDP growth projected at 4.3% in 2025, moderating to 2.7% in 2026, and inflation stabilizing around 2%, the figures suggest a steady hand on the wheel. However, they also signal an economy advancing cautiously at a time when bolder strides may be needed to keep pace with a fast-evolving region.
Across Southeast Asia, many ASEAN member states are projecting annual growth rates above 5%, driven by dynamic sectors such as digital services, manufacturing, and green technologies. Vietnam is expected to grow by around 6% in 2025, Cambodia by 6.5%, and the Philippines by over 6.2%. These figures reflect more than just economic statistics—they tell a story of countries undergoing significant transformation, powered by strategic investments in education, infrastructure, and innovation.
In contrast, Timor-Leste’s current trajectory suggests a slower, more fragile growth path. This is not a failure of intent. Indeed, Timor-Leste has made impressive gains since independence—establishing democratic institutions, improving access to basic services, and building a sovereign petroleum fund admired for its transparency. However, the structural challenges that continue to weigh on development—limited economic diversification, a small private sector, low productivity, and a high dependence on oil revenues—require renewed attention and ambition.
Many of these challenges are rooted in Timor-Leste’s history and geography. Progress has been understandably incremental as a small island state emerging from decades of conflict and rebuilding from the ground up. However, the world around Timor-Leste is changing rapidly. Technology, regional integration, and climate transitions reshape how countries compete and grow. The question is no longer whether Timor-Leste can achieve stability—it has—but whether it can transform that stability into opportunity for all its people.
The core of the issue lies in the country’s development model. Oil revenues have enabled large-scale public spending, but this has not always translated into widespread job creation or long-term economic dynamism. Agriculture sustains much of the rural population, contributes less than 15% of GDP, and remains vulnerable to drought and low productivity. Meanwhile, sectors with potential—such as tourism, renewable energy, and small-scale manufacturing—remain underdeveloped. Public investment in human capital, particularly education and vocational training, has grown but still falls short of what is needed to equip a new generation for the modern economy. For instance, only about 67% of children complete lower secondary school, and tertiary enrollment remains below 10%, limiting the country’s capacity to compete in an increasingly knowledge-based regional economy.
Rather than assigning fault, it is more constructive to recognize that these challenges are complex and shared. Economic transformation is not the task of governments alone—it is a collective effort that involves communities, businesses, educators, civil society, and international partners. Policy choices matter, but so do trust, collaboration, and the willingness to take long-term risks for long-term rewards. It is also important to acknowledge that good governance, while essential, takes time to build and requires continuous nurturing across generations.
If Timor-Leste is to narrow the development gap with its ASEAN neighbours, it will need to embrace a more ambitious and inclusive path. This means investing more deliberately in people, ensuring that children are not just in school but learning skills that matter in tomorrow’s economy. It means empowering farmers and entrepreneurs with tools, credit, and markets. It means creating a public service culture rooted in professionalism, efficiency, and the public good. It means looking beyond petroleum and developing value chains to create dignified jobs in green industries, creative sectors, and regional trade.
There is no single blueprint. However, examples from the region offer inspiration. Vietnam’s success in rural industrialization and human capital investment, Indonesia’s efforts to expand downstream processing and digital inclusion, and the Philippines’ thriving service exports all illustrate what is possible when vision aligns with strategic execution.
Timor-Leste has many ingredients for success: a youthful population, natural beauty, abundant marine and land resources, and substantial international goodwill. However, to harness these assets, there must be a renewed commitment to long-term planning, shared prosperity, and policy coherence. The 2026 budget can be more than a financial plan—it can be a signal of intent, a statement that the country is ready to build for today and future generations.
Ultimately, the journey ahead is not about catching up for comparison. It is about realizing the aspirations of the Timorese people—men and women, youth and elders, rural and urban—who dream of a country where opportunity is not a privilege, but a promise. (*)
