Xanana Gusmao, leader of the National Congress for Timorese Reconstruction (CNRT) (Image: AAP/Lukas Coch)

Timor-Leste’s coalition government has fractured, possibly fatally, marking a new low point in the 18-month leadership of Prime Minister José Maria Vasconcelos (known by his nom de guerre, Taur Matan Ruak). This raises the prospect of recession and months of political in-fighting.

On Friday, the largest party in the ruling three-party Alliance for Change and Progress (AMP), The National Congress for Timorese Reconstruction (CNRT), abstained from supporting the annual budget. Failure to pass the budget means Ruak, leader of the People’s Liberation Party (PLP), will be unable to enact new spending programs in a country heavily reliant on government stimulus.

The main opposition party, FRETILIN, voted against the bill that contained deep cuts to health, education and sanitation yet retained hundreds of millions of spending on the government’s controversial liquid natural gas processing infrastructure and unaccounted government transfers criticised by economists. The abstention by CNRT sealed the budget's fate.