East Timor was under Portuguese rule for more than four hundred years through 1975, when it was annexed by Indonesia. Following an agreement among the UN, Indonesia, and Portugal on May 5, 1999, a referendum was held on August 30, 1999, on the future status of East Timor. Four-fifths of the citizens of voting age voted in favor of independence. This outcome triggered widespread violence, which resulted in damage and destruction of property, the displacement of about two-thirds of the population, and the loss of many lives.

On September 21, 1999, a multinational peace-enforcement mission (INTERFET) arrived in East Timor to restore security and facilitate humanitarian relief efforts. The United Nations Mission to East Timor (UNAMET) was entrusted with the task of overseeing the humanitarian relief effort. On September 29, 1999, the World Bank coordinated a donors' conference in Washington, with the participation of the National Council of the Timorese Resistance (CNRT) and representatives of the Indonesian government. At that conference it was decided that there would be a joint mission of all multilateral and bilateral assistance agencies to be led by the World Bank that would assess the economic and social situation in East Timor and help to coordinate more effectively the international effort to assist East Timor. Subsequently, on October 20, 1999, the People's Consultative Assembly of Indonesia revoked the decree of annexation of East Timor, and five days later, the UN Security Council issued a resolution establishing the United Nations Transitional Administration in East Timor (UNTAET) with broad responsibility for the administration of the territory of East Timor during its transition to independence.

On October 22, 1999, in response to a request from the United Nations Secretary General, the Executive Board approved a proposal for IMF staff to field a mission to East Timor, and for the IMF to provide technical services in its areas of expertise. With this mandate, during the October 26­ November 21 period, an IMF mission visited Dili to prepare a macroeconomic assessment and provided advice on how to develop a macroeconomic framework for guiding key policy decisions. The mission coordinated its work closely with the World Bank-led Joint Assessment Mission (JAM). A summary of the IMF mission findings was presented to an informal IMF Executive Board meeting on November 22, 1999, and to a donors' meeting held in Tokyo on December 17, 1999. Since then, the IMF staff has had a permanent presence in Dili by means of sequential missions, and there have been four technical assistance missions on fiscal and monetary matters, involving the IMF's Fiscal Affairs Department (FAD) and Monetary and Exchange Affairs Department (MAE). In addition, the IMF has provided technical support and financial assistance (through an administered account) for recruiting qualified staff for top positions in the key economic institutions.¹

Since mid-November 1999, UNTAET has been led by Mr. Sergio Vieira de Mello, the Special Rep-resentative of the Secretary General of the UN for East Timor (SRSG). UNTAET established the National Consultative Council (NCC) to be a forum for reaching consensus on all policy matters and it helped to address a serious power vacuum that had arisen from the destruction of the normal structures and systems of government. The NCC consists of 15 members: four from UNTAET, including the SRSG; and 11 East Timorese, comprised of seven from the pro-independence movement, one from the Catholic Church, and three from the pro-autonomy faction.²