BANDAR SERI BEGAWAN – Brunei’s fiscal deficit is on track to widen even further with a $2.98 billion shortfall as of February 28 this year, the largest deficit in six years and nearly three times more than the same period last year.
In his 2021/22 budget speech at the Legislative Council on Wednesday, the second minister of finance and economy said the coronavirus-induced oil price crash has caused a 57.7 percent plunge in government revenue to $1.46 billion in the current fiscal year.
As Brunei is still heavily reliant on the oil and gas sector in generating revenue, YB Dato Seri Setia Dr Hj Mohd Amin Liew Abdullah said weak global oil demand and lower production resulted in a larger gap in earnings and spending.
Earnings from the oil and gas sector plummeted 69.9 percent while the non-hydrocarbon sector also underperformed with a 6.6 percent decline in revenue compared to the previous financial year, he said.
Describing 2020 as a challenging year, the minister said the government has spent $4.44 billion up to February this year, accounting for 75.7 percent of the 2020/21 budget allocation.
The Ministry of Finance and Economy tabled a proposed budget of $5.86 billion for the upcoming 2021/22 fiscal year – the same amount for the third year running.
Brunei is expected to endure an even larger budget deficit in the next financial year despite oil prices showing signs of a rebound.
The government has projected a budget shortfall of $3.25 billion in 2021/22, with national revenue estimated at $2.61 billion.
Citing a US Energy Information Administration March 2021 report, YB Dato Dr Hj Mohd Amin Liew said Brent oil prices are predicted to rise from an average of US$42 per barrel last year to US$61 per barrel in 2021 as the world slowly recovers from the global pandemic.
Domestic economy grew 1.2% in 2020
The economy expanded a modest 1.2 percent last year, down from 3.9 percent in the previous year, figures from the Department of Economic Planning and Statistics (DEPS) showed.
Last year’s GDP growth comes after a strong showing in the non-oil and gas sector, which grew nine percent year-on-year following increased petrochemical exports.
YB Dato Dr Hj Mohd Amin Liew said Hengyi Industries has exported 9.46 million metric tonnes of petrochemical products worth US$4.08 billion since its oil refinery started operations in November 2019.
The downstream sector has been the top performer in Brunei’s economy in 2020, with the manufacturing of petrochemicals surging 323.9 percent.
Bright spots were also seen in the communications sub-sector (15.9%) and agriculture, forestry and fisheries sub-sector (11.7%).
The minister added that the wholesale and retail sub-sector rose 2.8 per cent as more people stayed in the country due to COVID-19 travel restrictions.
The travel ban — imposed last March — led to an increase in consumer demand for goods such as computers, electrical appliances, pharmaceutical and medical items, cosmetics and toiletries, he said.
In contrast, the energy sector contracted 4.9 percent owing to weak oil prices and lower output.
DEPS has forecast GDP growth between 0.8 and 1.6 percent in 2021, with the oil and gas sector expected to register just 0.5 percent growth.
The non-oil and gas sector is also forecast to remain in positive territory between 1.1 and 2.9 percent.
Gov’t to spend more on staff salaries, less on development projects
Breaking down the $5.86 billion budget proposal for 2021/22, YB Dato Dr Hj Mohd Amin Liew said the government will spend $2.02 billion or 34.4 percent of the total budget on the salaries and allowances of 65,281 civil servants.
The government last year proposed $1.99 billion to be spent on 67,126 civil servants’ salary and allowance.
The 2021/22 budget allocation for recurring expenses has also been raised to $2.18 billion (39.3% of total) as opposed to $2.01 billion in the current fiscal year.
However, the proposed funding of projects under the 11th National Development Plan will decrease from $800 million to $600 million (10% of total).
Accrued expenses will take up the remainder of budget funds.
An undisclosed amount of funds has also been set aside for Brunei’s hosting of ASEAN meetings.
The minister said the government’s proposed budget will be geared towards initiatives that can stimulate economic growth, strengthen the supply chain to ensure food security, and promote the digital economy.
He added that the budget will focus on three priorities — improving national productivity; provision of sustainable and resilient facilities and infrastructure for public welfare and economic development; and producing competent and employable human resources.
Some of the key allocations highlighted in the budget readout:
Boosting local food production
• $17 million for livestock industry development
• $15.7 million for rice buy-back scheme
• $10 million to increase vegetable production using advanced technology
• $8.9 million for crop, livestock and agri-food industry management
• $8 million for second phase of commercial padi planting project in Kandol, Belait
• $7.2 million to develop aquaculture industrial sites
• $3.3 million for fisheries planning and development, and increasing fisheries production
Improving public service productivity
• $5.1 million for MoFE’s Treasury Accounting and Financial Information System (TAFIS) 2.0, including e-payroll system
• $4.98 million to upgrade Bru-HIMS with new Picture Archiving and Communication System
• $3.6 million for Government Data Center and Cloud Infrastructure
• $2.2 million for Population and Housing E-Census System
• $2.2 million to develop One Common Billing System
• $1.9 million for Government Human Resource Management System (GHRMS), which will be integrated with TAFIS 2.0
• $1.9 million to upgrade public schools’ network infrastructure
• $1.8 million for One Common Portal project to integrate the System for Tax Administration and Revenue Services and Corporate Registry System
• $1.8 million for Ministry of Transport and Infocommunications’ National Centralised Database to facilitate information integration and sharing
• $1.2 million for Centralised Data Management System
• $860,000 to upgrade Brunei Darussalam National Single Window system
• $729,000 for National Welfare System
• $227,000 to improve Vehicle Exit-Entry System
Public facilities & infrastructure
• $86 million to boost electric power system (from a total planning cost of $316 million)
• $70 million to finance Phase 2 of Lugu National Housing Project and Phase 7 of Tanah Jambu National Housing Project (from a total planning cost of $315 million)
• $58 million for water supply upgrading works (from a total planning cost of $216 million)
• $42.5 million for road upgrades (from a total planning cost of $1.17 billion)
• $41.6 million to fund the construction of Sultan Hassan Secondary School in Bangar, Universiti Teknologi Brunei’s School of Applied Sciences and Mathematics building, new Universiti Islam Sultan Sharif Ali campus, new Seri Begawan Religious Teachers University College campus, Rimba Arabic Secondary School and new buildings for religious schools in Kg Kiarong and Kg Bolkiah (from a total planning cost of $232.5 million)
• $34 million to upgrade runway of Brunei International Airport and security surveillance system (from a total planning cost of $99 million)
• $13.7 million for the building of mosques (from a total planning cost of $30 million)
• $12.4 million for flood prevention and drainage management (from a total planning cost of $60.3 million)
• $2.8 million for Ministry of Home Affairs to improve Kampong Ayer tourism products and travel packages
• $1.5 million for Ministry of Primary Resources and Tourism to enhance quality of tourism products and services
Public health and welfare
• $99.6 million for the purchase of medicines and medical consumables
• $30 million for payment of medical services at Pantai Jerudong Specialist Center and Gleneagles Jerudong Park Medical Centre
• $20 million to curb disease outbreaks, including the purchase of COVID-19 vaccine
• $6.2 million to fund a new block at Jubilee Perak Sengkurong Health Centre and the National Isolation Centre Laboratory (from a total planning cost of $19.8 million)
• $14 million for monthly welfare assistance programme
• $1.5 million for in-kind aid under Miftaahun Najaah Scheme, such as uniforms, stationery and books
Capacity-building and education
• $56.5 million for student allowances
• $40.7 million in scholarships under the education and religious affairs ministries
• $56.4 million in provision of education services, including CfBT costs
• $55 million to finance Manpower Planning and Employment Council programmes, including Human Resource Development Fund, i-Ready and Centre for Capacity Building (from a total planning cost of $223.8 million)
• $47.4 million for in-service training
• $2.5 million for Technical and Vocational Education Scholarship Scheme (from a total planning cost of $8 million)
• $2.7 million for management of Youth Development Centre
• $2.2 million for National Service Programme (PKBN)
• $785,000 to implement Civil Service Leadership Pipeline (from a total planning cost of $2.5 million)