Dili, November 7, 2025 (Média Democracia) – The Mata Dalan Institute (MDI) officially held a press conference today to present its analytical submission to the National Parliament regarding the 2026 State Budget Proposal. The press conference took place at the Haburas Building in Farol, Dili.
The spokesperson for the Mata Dalan Institute (MDI), Noe Gaspar Tilman, stated that the submission recognizes the Government’s political commitment to strengthen rural development, promoting decentralization, and advancing economic diversification in Timor-Leste, despite its continued heavy dependence on petroleum.
“MDI’s independent assessment acknowledges progress in transparency and consultation reflected in the 2026 Budget, but it remains highly centralized, unbalanced across sectors, and limited in supporting inclusive, climate-resilient, and locally oriented development,” said MDI spokesperson Noe Gaspar Tilman.
He further explained that the consolidated budget allocation for fiscal year 2026 amounts to USD 2.291 billion, of which USD 1.85 billion is allocated to Central Administration. Although the IX Constitutional Government’s national rhetoric emphasizes support for the rural economy, the productive sector, such as agriculture that receives only USD 20.2 million (less than 1%), even though this sector sustains around 67% of Timor-Leste’s population.
“In comparison, roads and bridges receive USD 223 million, while the petroleum and mineral sector is allocated USD 194 million. This demonstrates a continued focus on large-scale, capital-intensive investments rather than people-centered, productive, and sustainable development. This imbalance highlights a structural challenge in Timor-Leste’s fiscal stability and economic growth, which still relies heavily on withdrawals from the Petroleum Fund that finance approximately 75% of total expenditure,” the MDI spokesperson added.
Tilman said MDI’s analysis identified several critical issues in the 2026 State Budget Proposal, including limited decentralization and local fiscal empowerment. The 2026 budget allocates USD 57 million for decentralization, but does not clearly specify how much support municipal or community-level initiatives will directly. There is no Municipal Development Fund or dedicated transfer mechanism to ensure predictable, transparent, and equitable financing for each municipality.
“Rural development programs remain fragmented across ministries such as Agriculture, Infrastructure, Environment, and State Administration, lacking an integrated rural development framework. This results in duplication and inefficient resource use. Such fragmentation aligns with findings from the World Bank’s 2023 report and the ADB’s Country Partnership Strategy (2023–2027), both of which underline the need for stronger institutional coordination to achieve meaningful rural progress,” Tilman explained.
He added that the minimal investment in non-petroleum productive sectors underscores the need for consistent calls for economic diversification. Investment in agriculture, tourism, small-scale manufacturing, and creative industries remains insufficient. Continued dependence on petroleum revenue poses long-term fiscal and economic risks. MDI recommends shifting investment priorities toward productive sectors capable of generating domestic revenue, employment, and sustainable growth.
“Inadequate support for youth entrepreneurship and innovation remains a concern. Although the Government allocates USD 32.1 million to support Small and Medium Enterprises (SMEs) and cooperatives, the budget does not specify how much directly targets creative and innovative youth entrepreneurship. With youth unemployment exceeding 17% (ILO, 2023) and over 60% of the population under 30, we emphasize that investing in youth-led enterprises, vocational training, and digital innovation is critical for inclusive economic transformation,” Tilman stated.
He reaffirmed that weak allocations for climate change adaptation and disaster risk reduction persist. Only USD 2.5 million is allocated for climate resilience, biodiversity, and blue economy initiatives. MDI noted that this allocation lacks clarity on distribution and implementation mechanisms, particularly at municipal and community levels. Without defined objectives or monitoring indicators, the impact of climate funds may remain limited, especially in flood- and drought-prone areas.
“Participatory land-use mapping conducted by MDI in 2024 recorded 1,787.66 hectares of productive land lost to flooding in the municipalities of Liquiça, Bobonaro, and Manatuto. Despite such alarming data, allocations for land-use planning remain minimal and centralized, with weak coordination among line ministries such as Agriculture, Environment, and State Administration. Inadequate land management continues to threaten food security, rural livelihoods, and investment confidence,” Tilman reaffirmed.
In response to these challenges, MDI’s submission presents five key recommendations. First, to establish a Municipal Development Fund and create a dedicated mechanism under the Ministry of State Administration (MAE) to ensure direct and predictable fiscal transfers to municipalities and villages. This would strengthen local autonomy, transparency, and responsiveness to rural needs.
“Second, to integrate rural development and land management through the formation of an Inter-Ministerial Committee on Integrated Rural Development under the Prime Minister’s Office, linking programs across the Ministries of Agriculture, Infrastructure, Environment, and State Administration. A decentralized land management system supported by digital mapping and climate data should guide rural planning and protect productive land,” Tilman explained.
He added that investing in non-petroleum productive sectors requires reallocating a greater share of public investment toward agriculture, tourism, creative industries, and small-scale manufacturing to diversify income sources and strengthen domestic economic resilience.
“Third, to strengthen youth entrepreneurship and innovation, establish a National Youth Entrepreneurship Fund with targeted subsidies, access to credit, and mentorship for startups, particularly in rural areas. Support youth innovation in agribusiness, digital economy, and green enterprises through collaboration with BNCTL, SEFOPE, and private sector partners,” the MDI spokesperson clarified.
He further noted that to enhance climate and disaster risk governance, Timor-Leste must develop a national framework for climate finance with clear guidelines, transparent oversight mechanisms, and localized implementation through Municipal Climate Resilience Funds.
MDI believes these reforms can transform fiscal planning into a genuine driver of inclusive growth, resilience, and social cohesion. This vision aligns with the Prime Minister’s address to the National Parliament on November 5, 2025, emphasizing that Timor-Leste’s greatest strength lies not in its petroleum reserves or geography, but in the resilience, creativity, and determination of its people.
Finally, MDI urged the National Parliament, Government, civil society, and private sector to work together from the north to the south coast and from east to west in order to transform this vision into coordinated, evidence-based action. Timor-Leste’s prosperity and stability, MDI concluded, will not be built solely on petroleum wealth but through empowering its people via decentralization, sustainable land management, climate resilience, youth innovation, and inclusive rural development.
Report: Nelfiano
Photo: Nelfiano