Brunei is Spending Big, But Can It Afford It? The $3.1 Billion Deficit Question
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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Investment Recovery Lead at Brunei Shell Petroleum
15 小时前Government finance is fundamentally different from household finance. A monetarily sovereign nation, Brunei, is not constrained by the same budgetary limitations as individuals or businesses. A budget deficit is not a burden – it is an economic stimulus. It represents money being injected into the economy, creating opportunities for businesses and individuals to thrive. On the other hand, consistent budget surpluses have the opposite effect, as seen in previous years, contributed to economic stagnation. Now, the country is in a position where it must play catch-up to accelerate growth. That B$3.1 billion deficit is far too small. To drive economic transformation and achieve Vision 2035, Brunei should be running a much larger deficit every year. The government must invest aggressively in creating new industries, world-class infrastructure, and strategic economic initiatives. This spending will stimulate job creation, innovation, and long-term prosperity, ensuring Brunei becomes a dynamic and diversified economy. With less than nine years remaining until 2035, the time to act is now. Brunei must seize the moment by making bold financial decisions that will lay the foundation for sustainable growth and secure the nation’s future.