Oil rich East Timor weighs the risks of ditching the US dollar
With the country's fragile prosperity built on the US dollar, experts warn that introduction of its own currency could make or break the economy
East Timor's fragile new prosperity has been built on the US dollar. Ditching the dollar, economists say, could make or break its economy. But it might be on the cards.
The central bank in Dili is an unimposing building, but the Banco Central de Timor-Leste has come a long way from its origins as the United Nations "Central Payments Office" (CPO), and has earned a reputation for financial prudence. In the streets outside, the results are plain to see, in terms of advertising hoardings, people going to work and other signs of economic growth.
In terms of economic policy, though, the central bank is still largely dependent on the US Federal Reserve. When the UN briefly took over the running of East Timor after its bloody 1999 vote for independence, the CPO arranged for the import of thousands of dollars in US banknotes to get the economy of the ruined half-island going again.
Fifteen years on, the US banknotes are still there.
Buoyed by around US$17 billion of oil and gas revenues in a "petroleum fund", East Timor's economy is no longer a basket case. The US coins were long ago sent back and replaced by local centavo coins but East Timor is still firmly a "dollarised" country, which restricts the central bank's control over its economy.
For many East Timorese it is an issue of national pride. Many ordinary East Timorese feel an independent country should have its own currency. Experts wonder if it is worth the risk.