This story was updated on Feb 28, 2022 to include additional comments from the Second Minister of Finance and Economy.
BANDAR SERI BEGAWAN – The government is set to spend 42 percent less on development projects in the upcoming 2022/23 financial year, despite a falling budget deficit in the current fiscal year.
Higher government revenue is projected to cut Brunei’s budget deficit by 53 percent in FY 2021/22, but the budget shortfall is expected to widen again in the 2022/23 financial year.
Delivering his FY 2022/23 budget speech at the Legislative Council on Saturday, the second minister of finance and economy said the budget deficit is forecast to ease to $1.52 billion in FY 2021/22 from the largest deficit of $3.24 billion in the previous year.
YB Dato Dr Hj Mohd Amin Liew Abdullah attributed the lower fiscal deficit to a rebound in oil prices that contributed to higher government earnings.
Revenue is projected to more than double from $2.05 billion in FY 2020/21 to $4.15 billion in FY 2021/22, following rising crude oil prices to over US$90 a barrel.
Despite a positive economic outlook for this year, government spending will remain contained after the minister announced a proposed budget of $5.7 billion for FY 2022/23 – a 2.7 percent cut from the previous year.
YB Dato Dr Hj Mohd Amin said increased spending on tackling the COVID-19 pandemic had driven a rise in government expenses, which were predicted to total $5.67 billion in the current fiscal year.
He added that the government had spent $138.5 million to increase COVID testing capacity, special allowances for frontline workers, purchase of vaccines and antigen rapid test kits, upgrade the BruHealth app, and supply of food rations to individuals undergoing isolation.
Brunei to face budget deficit for fourth straight fiscal year
Spending is set to outpace revenue for the fourth straight year in 2022/23 as the budget deficit is projected to expand to $2.53 billion.
While the government gave a rather downbeat forecast for the upcoming year, the Centre for Strategic and Policy Studies had a more optimistic outlook on Brunei’s fiscal position, suggesting higher oil and gas output and prices would reduce the budget gap.
When asked why the government revenue forecast erred on the conservative side, the minister said it accounted for any potential shock to energy prices.
“We have seen the oil prices going up the significantly, even to the extent that it exceeded the USD$100 per barrel for Brent, but we cannot assume that this will stay throughout the year.
“So when we plan, we cannot plan to be too optimistic about what we’re going to get. So we have to be realistic that this is a phenomenon that may not continue to persist throughout the year,” he told The Scoop in an interview.
He added, “Oil prices are not the only factor that will determine revenue. It’s also the production of the oil and gas itself; the exchange rate that we will see in the market. So all these things will determine as to how much revenue we will get.”
The sultanate has been facing increasing budgetary pressure since the oil price crash in 2014, recording fiscal deficits in seven of the last eight years.
With a predicted revenue of $2.25 billion in FY 2022/23, YB Dato Dr Hj Mohd Amin said the oil and gas sector is expected to make up the majority (70.9%) of government earnings worth $3.17 billion.
The larger budget deficit forecast in FY 2022/23 will affect the funding of National Development Plan projects as the government has proposed a significant cut in development expenditure from $600 million to $350 million in the next fiscal year.
This is the final year of the 11th National Development Plan, with MoFE currently preparing a roadmap for the next five-year plan that aims to achieve objectives in Wawasan 2035.
Giving a breakdown of the budget, the minister said $2.15 billion (37.7%) of the proposed budget will be used to pay salaries, wages and allowances to civil servants, a slight uptick from $2.02 billion.
Wage growth in the public sector has largely been stagnant since 2015.
The budget allocation for recurring expenses declined from $2.18 billion in FY 2021/22 to $2.14 billion in the upcoming fiscal year.
Accrued expenses will take up the remainder of budget funds.
The minister said the proposed budget will focus on four key areas — maintaining public welfare; food security; providing support and assistance to the private sector; and enhancing human resource capacity for a future-ready workforce.
Some of the key allocations highlighted in the budget readout:
Maintaining public welfare
• $124.52 million to tackle COVID-19, including increasing the supply of COVID vaccines and improving the BruHealth app
• $55 million for the purchase of medicines
• $41.5 million for medical supplies and services
• $1.9 million for the construction of Jubli Perak Health Centre, emergency services building at Suri Seri Begawan Hospital, and a new block at Sengkurong Health Centre (from a total planning cost of $5.6 million)
• $30 million for payment of medical services at Gleneagles Jerudong Park Medical Centre; The Brunei Cancer Centre and Brunei Neuroscience, Stroke & Rehabilitation Centre.
• $38.8 million for construction of public housing at Kg Lugu and Kg Tanah Jambu (from a total planning cost of $250 million)
• $26.1 million to improve water supply infrastructure (from a total planning cost of $216 million)
• $44 million for the upgrading and maintenance of electricity infrastructure (from a total planning cost of $315.7 million)
• $20.2 million for road network improvement (from a total planning cost of $1.16 billion)
• $15 million for disaster management, such as floods and landslides
• $200,000 to build a new welfare home shelter (from a total planning cost of $1.8 million)
• $10 million for second phase of commercial padi planting project in Kandol, Belait (from a total planing cost of $46 million)
• $9 million for rice buy-back scheme
• $5 million to increase vegetable production by using modern technology (from a total planning cost of $30 million)
• $3 million to boost livestock productivity (from a total planning cost of $26 million)
• $1.9 million to develop aquaculture sites (from a total planning cost of $3.8 million)
Private sector empowerment
• $1 million to improve and upgrade basic utilities at industrial and commercial sites
• $23 million to finance infrastructure development and upgrading works at industrial sites under Darussalam Enterprise (DARE). The two-year project is expected to begin in March 2022.
• $ 13.2 million for 11th National Development Plan projects in information technology, including halal certification system; national business services platform; and electronic building tax (from a total planning cost of $75.9 million)
Enhancing human resource capacity
• $40.1 million in scholarships
• $1.5 million to support the ‘Miftaahun Najaah’ scheme, which provides assistance to underprivileged students
• $47 million in provision of education services, including CfBT costs
• $38 million to fund the provision of infrastructure for primary, secondary and religious schools and higher learning institutions (from a total planning cost of $235 million)
• $37.5 million to build civil service capacity
— Additional reporting by Ain Bandial