Karen Polglaze, Canberra – International donors today signed-off on East Timor's 2001-02 budget, the blueprint that will take the new country through elections to independence.

Twenty-nine countries and institutions wound up a two-day meeting analysing progress towards political, social and administrative rebuilding in the territory laid waste by Indonesian military and militia groups in 1999 following its vote to separate from Indonesia.

The budget, drawn up by East Timor's interim government in consultation with the United Nations Transitional Administration in East Timor (UNTAET), was prudent and restrained, administrator Sergio Vieira de Mello said.

The $US65 million budget will concentrate on poverty alleviation, health, eduction and social rebuilding and was expected to be supported by the constituent assembly that will be elected on August 30.

There is a $US20 million deficit in recurrent funding that donors will support, Mr de Mello said. "Donors, as a rule, when they endorse, they also fund," he told a media conference after the Timor Donors' Meeting. "We are confident ... they will help us."

Mr de Mello said donors had shifted the focus to the medium-term outlook in this fourth meeting of the group which supplies funding for reconstruction of East Timor.

Continuing budget deficits were expected until earnings from oil and gas reserves in the Timor Gap come on line from 2004 and until private enterprise gets up and running again. The budget was seen as a cautious one, and donors urged this approach be continued in future years, Mr de Mello said.

A looming concern was the end of the UNTAET mandate in eight months. While most agree that peacekeepers will be needed beyond the as-yet unnamed day for independence, there may be less consensus on the continuing use of international civilian police and administrators.

Australian Foreign Minister Alexander Downer yesterday echoed the views of many when he called on the UN Security Council to mandate a post-independence mission for East Timor that was comprehensive and funded out of regular contributions to the world body.

Mr de Mello said today that much had been achieved in East Timor, even though it had been a colossal job. But much remained to be done, he said. "It is essential that the UN remain engaged in the development process. To walk away too soon after independence and see East Timor falter is an untenable proposition, given the resources the international community has invested to date."

The security council is expected to consider in July the future of the UN in East Timor. Norway will host the next donors' meeting in Oslo, in December.