Timor-Leste

Timor-Leste adopted the USD as its legal tender currency shortly after its exit from a quarter-century of Indonesian occupation, and continued to use the dollar on the basis of a consensus that its financial system and institutional capacity would have to be significantly stronger before the issue of its own currency would make sense.

Years

Targets and attainment

Classification

2002-17

referendum 1999 strongly favours independence from Indonesia, but followed by violence with destruction or closure of infrastructure, banks and other institutions, until Australian-led peace-keeping mission arrives followed by UN-led administration; USD adopted 2000 as sole legal tender for now, but Indonesian rupiah initially still used for retail purposes; parliament elected August 2001, president 2002; formal independence 2002; economy slowly recovers, with basic (mainly foreign-owned) financial system, new fiscal institutions and banking and payments authority, which cannot lend to government or banks and has no monetary or exchange rate role; rupiah and other currencies phased out by 2003; oil and gas production from 2004 (which dominates activity, fiscal revenues and exports), Norwegian-type petroleum fund set up 2005 along with commitment to long-term fiscal sustainability policy; 2006-8 renewed periodic civil unrest, new UN peace-keeping mission (which remains till 2012); existing monetary and exchange rate regime regularly reaffirmed, on basis that introduction of national currency would require strong institutional capacity and well-functioning financial markets; banking remains accessible to only small part of population; banking and payments authority becomes central bank 2011; statistical database initially very poor, remains weak despite improvements

use of another sovereign’s currency UASC

Selected IMF references: SISA 2003 pp10-13; SISA 2005 pp30-8; SR 2005 p10; SR 2006 p12; SR 2008 pp8, 17-18; SR 2011 pp11, 12-13; SR 2012 pp14-16; SR 2017 p13.

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