DILI (Reuters) - East Timor President Francisco “Lu Olo” Guterres said on Friday he will dissolve parliament and call new elections in a bid to end a prolonged political impasse in the tiny country since polls last year.

FILE PHOTO - Francisco "Lu Olo" Guterres shows his inked finger after casting his ballot during the 2012 presidential election, in Dili, East Timor April 16, 2012. REUTERS/Lirio Da Fonseca/File Picture

The 2017 election produced no clear winner, with the Fretilin party of Prime Minister Mari Alkatiri winning just 0.2 per cent more votes than the National Congress for Timorese Reconstruction (CNRT), the party of independence hero Xanana Gusmao.

Guterres asked Alkatiri, a political ally, to form government but a legislative stalemate ensued after a CNRT-led coalition, with the majority of seats in parliament, refused to pass his program.

The standoff led to Alkatiri accusing the opposition of an attempted coup, while the CNRT’s coalition described the government as unconstitutional.

“Only the people can help solve the new challenges we face. Humbly, the president asks the people to vote again in fresh elections,” Guterres told reporters.

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

Damien Kingsbury, an Australia-based East Timor expert who will act as an international observer, said it would take place in April at the earliest.

East Timor’s legislature will still function until the election date is set and campaigning begins.

Even so, the political ructions could delay any ratification of an agreement between Australia and East Timor over an estimated $40 billion in oil and gas reserves in the Timor Sea.

A new agreement on the maritime boundary was due to be signed in March, although negotiations are continuing.

As well as an agreed sea border, East Timor wants the oil and gas to be processed at a facility on its southern coastline, a proposal that has been resisted by the joint venture with development rights over the field led by Woodside Petroleum.

Kingsbury said the political rhetoric of recent months was “highly inflammatory and confrontational”.

Police raided the premises of Gusmao’s daughter, Zenilda Gusmao, last week in relation to alleged unpaid taxes, according to media reports. The government denied the raid was politically motivated.

The new election could stoke tensions further, although Kingsbury noted that the military and police remained largely disciplined and neutral.

East Timor has been unsettled by bouts of violence and political instability since it became independent from Indonesia in 2002. Members of the military and police mutinied in 2006.

“The question is whether the parties can control their members. I am sure they have the will to do so but whether they can (remains uncertain),” Kingsbury said.

The CNRT and its partners could run as a unified coalition, which some observers believe would see them as favorites to win the new election.

Senior CNRT leader Aderito Hugo said by phone the president needed to better explain his reasons for dissolving parliament before the party would accept it.

Luis Roberto from KHUNTO, a junior member of the opposition coalition, said his party would “obey” the president’s decision.