By MalaiHassan Othman
BANDAR SERI BEGAWAN, MARCH 2025: Brunei’s government has tabled a BND 6.35 billion budget for 2025/26, but its revenue forecast falls short, leaving a $3.1 billion deficit.
This gap signals a financial reckoning for a nation reliant on oil and gas. The burning question: Can Brunei sustain this trajectory?
A Growing Budget, But Shrinking Non-Oil Revenue
Despite economic diversification efforts, non-oil revenue remains underwhelming.
Brunei’s government revenue for the 2025/2026 fiscal year is expected to reach BND 3.26 billion (US$2.42 billion), with 75% (BND 2.45 billion or US$1.82 billion) still coming from the oil and gas sector.
Revenue from the non-oil and gas sector is projected at BND 802.24 million (US$595.46 million), showing slow progress in economic diversification.
This means that even with tax reforms and investment incentives, Brunei’s non-oil earnings barely dent the government’s financial needs.
According to the IMF’s 2023 Article IV Consultation Report, Brunei’s fiscal deficit is projected to widen to 9.2% of GDP, raising concerns over long-term financial sustainability.
Oil and gas have long cushioned Brunei’s economy, but global energy trends suggest diminishing returns. As reserves deplete, the fiscal gap will only widen.
Spending More Than Earning: How Will Brunei Manage?
Brunei's government has proposed a national budget of BND 6.35 billion (US$4.71 billion), prioritising public well-being, economic diversification, and human capital development.
Government spending continues at historic, expanding levels - expanding infrastructure, sustaining public sector salaries, and funding development projects.
But is this level of spending sustainable?
The IMF warns that Brunei’s public sector wage bill is 35% of total government spending, higher than ASEAN peers, signalling the need for fiscal restructuring.
Without a significant shift in revenue generation, borrowing, cuts to subsidies, or tax hikes could be unavoidable.
What’s the government’s long-term plan?
LegCo debates have emphasised diversification, but real-world impacts remain limited. Will policymakers accelerate reforms to bridge the fiscal gap?
Where Will New Money Come From?
Foreign direct investment (FDI) is crucial, but bureaucratic roadblocks and slow approvals hinder investment flows into Brunei’s non-oil sectors.
The IMF recommends gradual energy subsidy cuts and expanding tax revenues, including potential carbon pricing as a long-term fiscal measure.
The halal industry, digital economy, and eco-tourism have immense potential but require policy shifts and stronger incentives to attract international partnerships.
Can Brunei fast-track new industries, or will oil and gas remain the financial backbone despite its long-term volatility?
What Does This Mean for Ordinary Bruneians?
A sustained budget deficit could translate into economic adjustments - higher taxes, reduced subsidies, or stricter fiscal policies.
Will the average citizen feel the pinch?
The IMF notes that inflation, which peaked at 4.5% in 2022, has now dropped to 0.2%, providing some relief, but cost-of-living concerns persist.
The cost of living is already a concern, and any major policy shifts could impact household budgets, business operations, and employment opportunities.
With economic pressures mounting, how will the government balance fiscal responsibility with public welfare?
The Road Ahead: Tough Choices, Uncertain Outcomes
Brunei’s budget deficit is not just a financial issue; it’s a policy crossroads.
The next decisions will shape the nation’s economic future.
The IMF warns that delayed economic diversification could expose Brunei to significant financial risks, especially as the world moves towards decarbonisation.
Will policymakers take bold steps toward revenue growth, or will Brunei remain locked in an oil-dependent economic cycle?
One thing is clear: the window for change is narrowing. What happens next will define Brunei’s financial stability for years to come. (MHO/03/2025)
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