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.


Targets and attainment



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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