Substantial Weaknesses Remain in Timor-Leste’s Public Financial Management System

A recent assessment by the Public Expenditure and Financial Accountability (PEFA) has revealed that significant weaknesses persist in Timor-Leste’s public financial management system. Despite some progress, the country still struggles with incomplete budget coverage, weak internal audit capabilities, and inadequate procurement practices.

Areas of Concern

• Lack of a Supreme Audit Institution: The report highlights the need for a supreme audit institution to ensure transparency and accountability in government spending.
• Limited Capacity for Multi-Year Budgeting and Sector Investment Strategies: Timor-Leste’s public financial management system lacks the capacity to plan and manage multi-year budgets and sector investment strategies, which is essential for effective development planning.
• Reliance on Foreign International Experts: The country relies heavily on foreign international experts to manage public finances, which can lead to a lack of local capacity and ownership.

Procurement Practices

• Inefficient and Prone to Corruption: Procurement practices in Timor-Leste have been criticized for being inefficient and prone to corruption. The report recommends strengthening procurement practices to ensure transparency, efficiency, and accountability.
• Use of Less Competitive Instruments: The use of less competitive instruments, such as single sourcing and quotations, has become more prevalent, which can lead to a lack of competition and higher costs.

Anticorruption Efforts

• Inadequate Anticorruption Efforts: Timor-Leste’s anticorruption efforts have been deemed inadequate. The report recommends ensuring the independence of institutions aimed at preventing corruption, providing effective resources, and consolidating roles.
• Ranking in Corruption Perception Index: According to Transparency International, Timor-Leste ranked 127 out of 178 countries in terms of corruption perception index in 2010.

Recommendations

• Strengthen Procurement Practices: The report recommends strengthening procurement practices to ensure transparency, efficiency, and accountability.
• Improve Anticorruption Efforts: The report recommends ensuring the independence of institutions aimed at preventing corruption, providing effective resources, and consolidating roles.
• Address Major Risks: The Asian Development Bank has identified several major risks that need to be addressed, including the high degree of centralization in the Ministry of Finance and weak technical and administrative capacity across the public administration.

Conclusion

While Timor-Leste has made some progress in improving its public financial management system, significant challenges remain to be addressed if the country is to achieve its development goals. Addressing these weaknesses will require sustained efforts from government institutions, civil society organizations, and development partners.