East Timor's Prime Minister Xanana Gusmao has sent a letter of resignation to the president and the head of state is now deciding whether he accepts the offer to stand down, the government said.

Gusmao, 68, has served as either president or prime minister since East Timor became independent in 2002 after a 24-year struggle against Indonesian occupation.

The departure of Gusmao would deprive East Timor of a unifying leader who has helped resolve numerous crises, but analysts say it is time for Gusmao to step aside to start the transition to a new generation of leaders.

Gusmao "has sent his letter of resignation from the post of prime minister to the president," President Taur Matan Ruak said in a government statement on Friday.

"It is now for the president of the republic to consider and respond to the letter of resignation."

It is not clear what role, if any, Gusmao would play in government if his resignation is accepted, or who would succeed him.

Government overhaul

Gusmao has long signalled his desire to step down and speculation has been mounting in the past week that he would soon resign after he started talks with the president on a government overhaul.



In an earlier statement, authorities said talks were under way on a "major restructure of the government".

Authorities want to "reduce the size of the executive to create a more efficient and functional body focused on results, and allow opportunities for a younger generation of leaders to make a contribution to the nation," said the government statement.

Analysts said that the reshuffle could be aimed at getting rid of ministers from Gusmao's coalition who had been accused of corruption, before he steps down.

Gusmao led the military wing of the Revolutionary Front for an Independent East Timor, which fought against Indonesian occupation. Before Indonesia invaded in 1975, Portugal had ruled East Timor for centuries.

He was imprisoned in Jakarta towards the end of Indonesian occupation, but continued to lead the struggle for independence from behind bars.

After the Timorese voted overwhelmingly for independence in a UN-backed referendum in 1999, he returned to his homeland a hero and was elected the country's first president in 2002. He has been prime minister since 2007.