[DILI] East Timor President Francisco "Lu Olo" Guterres said on Friday he was dissolving parliament and would call new elections in a bid to end a prolonged political impasse in the tiny country since polls last year.

A minority government under Prime Minister Mari Alkatiri was formed after inconclusive polls last July but has struggled to push through badly needed reforms and make decisions on how to diversify the economy and boost flagging energy production.

"The president believes that only the people can help solve the new challenges we face. Humbly, the president asks the people to vote again in fresh elections," Mr Guterres told reporters in the presidential palace.

The president said the election date would be determined according to regulations in the constitution.

The move comes after Mr Guterres held a series of meetings with political parties this week as well as the state council, an advisory panel including former presidents.

Mr Alkatiri, also the secretary general of the Fretilin party, was East Timor's first prime minister after independence from Indonesia in 2002. He stood down in 2006 after a wave of unrest sparked by the sacking of 600 soldiers.

Mr Fretilin had been in a de facto coalition since 2015 with the National Congress for Timorese Reconstruction, a party founded by former independence fighter Xanana Gusmao.

However they did not reach a new agreement after the last elections and there have been signs of growing political tensions in East Timor, which has a land area slightly smaller than Hawaii and is home to 1.2 million people.

"For a democracy to be meaningful we must communicate with each other, listen to each other ... and through serious responsible discussion reach a consensus," Mr Guterres said.

REUTERS