Brunei Faces Fiscal Challenges Despite Economic Growth

Brunei continues to grapple with a significant budget deficit despite positive economic indicators. 

The Second Minister of Finance and Economy, Dato Dr Hj Mohd Amin Liew Abdullah, recently acknowledged that the country's financial situation remains challenging because it does not collect personal income taxes. Unlike other nations that rely on various taxes such as personal income tax, corporate tax, and sales tax to fund government operations, Brunei's unique tax policy has led to ongoing budget shortfalls.

 

Over the past decade, Brunei has experienced seven budget deficits, with the current fiscal year 2024/25 expecting a widening deficit of $2.99 billion. This deficit is primarily due to falling energy prices and disruptions in domestic oil and gas production, which together account for about 75% of government revenue and make up roughly half of Brunei's GDP.

 

Despite these fiscal challenges, Brunei's economy shows signs of growth. The Brunei Darussalam Central Bank (BDCB) recently released its first semi-annual policy statement for 2024, presenting a positive economic outlook. 

The International Monetary Fund (IMF) projects a stable global growth rate of 3.2% for both 2024 and 2025. In the first quarter of 2024, Brunei's economy grew by 6.8%, driven by an 8.9% increase in the Oil and Gas sector and a 5.0% rise in the Non-Oil and Gas sector.

 

BDCB expects continued economic growth throughout 2024 but warns of potential risks such as fluctuating commodity prices and reduced production of crude oil and liquefied natural gas (LNG). 

The central bank projects low inflation, between -0.5% and 0.5%, based on current Consumer Price Index (CPI) data. The financial sector has also seen growth, with total assets rising by 2.9% to BND24.6 billion in the first quarter of 2024, with significant contributions from the Islamic finance sector.

 

However, many Bruneians remain sceptical about these optimistic projections. Despite official reports, they feel that the reality on the ground is different, with issues like unemployment, rising living costs, and a sluggish economy dominating everyday life. 

Critics point out the increasing costs associated with oil and gas extraction and note that the relocation of major industry players like Total and Shell to Sarawak casts doubt on the health of Brunei's oil and gas sector. 

Local business owners and residents express frustration over the government's perceived inaction and missed opportunities for economic diversification. They argue that the heavy reliance on oil and gas is unsustainable and calls for investment in new industries such as biotechnology. 

Public forums and social media are filled with septical voices demanding more transparency and genuine reform. Frequent travellers and students voice concerns that Brunei's vision for 2035 may remain unfulfilled without substantial action and economic diversification.

 

Brunei's economic growth is a positive sign, but the country's ongoing fiscal challenges and public scepticism highlight the need for significant reforms and diversification strategies. 

To address these issues, the government must explore alternative revenue sources and implement policies that tackle the economic concerns of its citizens. Greater transparency, accountability, and meaningful reform are crucial to restoring public confidence and achieving sustainable economic development. (MHO/07?2024)