East Timor's President has compared former prime ministers Xanana Gusmao and Mari Alkatiri to the Indonesian dictator Suharto, saying there was "widespread discontent" among the public that their families were benefiting from lucrative government contracts.

The comments from Taur Matan Ruak - also known as Jose Maria Vasconcelos, were made in a fiery, unscripted speech before East Timor's parliament on Thursday, where he also decried the squandering of budget funds while many Timorese lived in poverty amid poor sanitation, education and health services.

East Timorese President Taur Matan Ruak, left, embraces his predecessor Jose Ramos-Horta during his inauguration ceremony in Dili, East Timor, in 2012. Credit:AP

"President of the Republic had received complaints concerning privileges granted to our brothers Xanana's and Marí's family members and friends within regarding contracts signed with the State," he said.

"[There is] widespread discontent over the granting of privileges. Suharto was overthrown by his family. Too many privileges! "