Subject: Lusa: Finance Minister Explains Budget

East Timor: Finance Minister Explains Budget 7 Nov-18:50

The dlrs 1.7 million increase in East Timor's budget for fiscal year 2000-2001 is primarily due to higher fuel prices, the transition administration's finance minister explained to Lusa on Tuesday.

"Petroleum prices have risen from 26 to 35 cents per liter and this has a major impact on the budget," said Michael Francino, emphasizing that the costs would be entirely borne by the territorial government.

Francino also discussed various tax measures and budget packages being debated this week by the National Council, East Timor's legislature during the transition to independence.

Spending during the 2000-2001 fiscal year is slated to rise from dlrs 57.63 million to dlrs 59.45 million. The hiring of additional government personnel accounts for some of the increase, he said.

Besides 600 soldiers, the nucleus of the territory's future armed forces, there will be more police and about 1000 teachers.

The two packages proposed by the transition cabinet also outline redistribution of funds remaining for the current fiscal year. Among the measures are the proposal to merge various sectors, such as environmental protection and census and research, under the aegis of the National Development Agency.

Other significant cuts are suggested for health and roads, due to the fact that spending to date for those sectors has been less than expected.

In the first four months of the current fiscal year, only dlrs 30,000 was spent on roads, due to delays in the contracting process, Francino said. The imminent onset of the rainy season means more delays in road repair work, thus reducing the need for spending in this sector even farther, he added.

Regarding the health cuts, Francino said they would have little impact, as most activity in this sector is carried out by non- governmental organizations.

The biggest budget increase is in the sector of electricity, which is to receive an additional dlrs 1.65 million, of which about dlrs 300,000 will be used to install meters, in order to begin charging major customers for the power they use.

"The process of installing meters should have begun on July 1, but I think it will only begin by the end of the year, mainly for the top consumers. Meters will later be progressively installed in private homes, beginning with those that have air conditioners, which are the biggest consumers of electric power," Francino said.

Other budget measures being reviewed this week by the National Council include increasing taxes on alcoholic beverages and private automobiles, a new income tax, and the introduction in January of taxes on corporate income.

Francino said he could not speculate on how the proposed income taxes would be received by the East Timorese, but reiterated that the tax burden would be less than during the Indonesian occupation.

Estimates indicate that the proposed measures will only add from 2 to 3 million dollars to state coffers, with most taxpayers paying a "symbolic contribution," he added, specifying that increased revenues from customs duties would account for most of the rise in state income.

The National Council's final report on the budget proposals will be submitted this week to the territory's transition cabinet and thence to the chief UN transition administrator, Sergio Vieira de Mello. Final approval is expected as early as next Monday.

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