Dili – East Timor's opposition called on Prime Minister Xanana Gusmao to resign Wednesday for alleged corruption in awarding a multi-million-dollar contract to a company linked to his daughter.

The opposition Fretilin party has accused Gusmao of nepotism in signing off on the $3.5 million government contract with Prima Food, in which his daughter Zenilda Gusmao is a shareholder, to import subsidized rice.

"(Gusmao) should address this and be accountable. The only way we can think of to demonstrate... political responsibility means that he should resign," Fretilin lawmaker Arsenio Bano said.

"It's not a test for the government – it has happened over and over again. It just shows that Xanana is corrupt," Bano said.

Senior government officials are banned by law from awarding contracts to close family members, but Gusmao's authorization for the contract was likely an honest mistake, Deputy Prime Minister Mario Carrascalao said.

The contract is intended to stabilize food prices as part of the impoverished country's Economic Stabilization Fund.

"The prime minister is not the one who is going to check whether all the small data and the process come to him with a recommendation," Carrascalao said.

"I don't think our prime minister has good people that are working in the cabinet that can do the job and filter the papers he can sign," he said. "If you become prime minister, it doesn't mean all your relatives should be out of business."

East Timor won formal independence in 2002, three years after a UN-backed referendum that saw an overwhelming vote to break away from Indonesia, whose 24- year occupation of the country cost an estimated 200,000 lives.

Despite massive natural gas deposits, East Timor's largely rural population is among the world's poorest.