Washington – Poverty-struck East Timor has made "commendable progress" since wrenching its independence from Indonesia but needs to do much more to manage its new-found energy wealth, the IMF said on Monday.

The International Monetary Fund (IMF) said its staff and the World Bank had concluded a joint review last week of a National Development Plan (NDP) presented by the East Timorese government.

"Since regaining independence in 2002, Timor Leste (East Timor) has made commendable progress by maintaining peace and stability, building state institutions, and improving basic service delivery," IMF deputy chief Takatoshi Kato said in a statement.

"Significant challenges remain, however, in addressing weak capacity, accelerating growth and employment creation in the non-oil economy, and ensuring the sound management of the country's oil/gas resources," he said.

Kato said the government was right to focus in the NDP on strengthening institutional capacity, stimulating job creation through private investment and on managing its potential energy wealth "responsibly and transparently".

East Timor, a former Portuguese colony, broke away from Indonesia in May 2002 after a 24-year armed struggle.

Now the poorest nation in Asia, it has been holding protracted talks with Australia to delineate a maritime boundary and carve up oil and gas resources under the sea-bed, that are estimated to be worth over US$30 billion.

The IMF official added that close cooperation between Prime Minister Mari Alkatiri's administration and foreign donors will "remain critical" to East Timor's immediate future.