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B$5.3 billion budget

A national budget of B$5.3 billion for the new fiscal year was proposed by YB Pehin Orang Kaya Laila Setia Dato Seri Setia Awang Haji Abdul Rahman bin Haji Ibrahim, Minister at the Prime Minister’s Office and Minister of Finance II, on the second day of the 13th Legislative Council (LegCo) session yesterday.

 

The proposed government spending is a record low as dwindling energy prices weigh on Brunei’s oil and gas-based economy.

 

This year’s proposed spending is lower than the B$5.6 billion budget for the 2016-2017 financial year, which was lower than the 2015-2016 spending of B$6.3 billion, and this was in turn less than the previous year’s figure of B$7.3 billion.

 

Meanwhile, the expected government income for the financial year 2017-2018 is projected to be B$3.45 billion. The projection has taken into account a revenue of B$2.509 billion from the oil and gas sector and B$941.33 million from the non-oil and gas sector which is 27.3 per cent of the total revenue.

 

This means that the country’s fiscal deficit will hit B$1.85 billion in the new fiscal, way below the deficit the country experienced last year.

 

“Alhamdulillah, we are thankful to Allah the Almighty for his blessings, and under the leadership of His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah ibni Al-Marhum Sultan Haji Omar ‘Ali Saifuddien Sa’adul Khairi Waddien, Sultan and Yang Di-Pertuan of Brunei Darussalam the country is still able to handle the challenges of continuous economic slowdown and falling government income, and the welfare of the people in the country are always given the priority,” the minister said in his budget speech.

 

The country’s economic growth is projected to be 0.8 per cent for 2017, the minister said, quoting figures from the Department of Economic Planning and Development (JPKE).

 

The projection takes into account the projects that are currently being undertaken such as for strengthening the integrity of assets in the oil and gas sector and the ongoing FDI programmes. In the short-term and medium-term, the nation’s economic growth will continue to depend on the level of the nation’s oil and gas production, the global oil market and economic situation. Whereas, investments and productivity of private sector is expected to grow further, the minister noted.

 

The minister also shared the steps that are currently being initiated and planned by the government in facing the challenges, strengthening the economy and ensuring the welfare of the people in the country.

 

During the nearly one-and-half hour budget speech, the minister explained that in this period of economic challenges, the government has prioritised its spending. “It is hoped that with the various initiatives undertaken, the government’s objective to expand the nation’s economic activities and income sources and create more job opportunities for locals in a sustainable way can be achieved more effectively.

 

“The continuously low global oil price has significantly impacted the nation’s economy. In terms of gross national income at constant prices, the national economy is expected to fall 2.7 per cent in 2016. The nation’s exports and imports were also affected. In 2016, exports fell 22.7 per cent to B$6.74 billion compared to B$8.71 billion in 2015. Whereas, the nation’s imports declined 17.1 per cent to B$3.69 billion compared to B$4.45 billion in 2015. The situation has affected the government’s fiscal position.”

 

The minister said the country recorded a high deficit level of 15.4 per cent of the gross domestic product (GDP), or B$2.6 billion, for the financial year 2015-2016, adding even though a high level of budget deficit was recorded, the government successfully managed to bring down spending by 13 per cent to B$6.3 billion compared to B$7.3 billion in the year previous year.

 

Similarly, in the first nine months of the 2016-2017 financial year, the fiscal deficit was B$2.5 billion as a result of a 36.4 per cent or B$1.4 billion fall in government income from the oil and gas sector.

 

The government spending during this period stands at B$4.4 billion.

 

Even amid the negative national GDP growth in 2016, several sectors actually recorded positive growth. Among them is the financial sector which recorded a growth of 8.8 per cent; electricity and water sector 4.3 per cent; domestic services sector 8.8 per cent; property and housing sector 1.8 per cent; hotel and restaurant sector 1.3 per cent; and communications sector 0.3 per cent.

 

In the third quarter of 2016, the total assets and deposits of banks recorded an increase of 6.6 per cent and 3.4 per cent respectively year on year, whereas currency in circulation grew 1.7 per cent year on year, reflecting continuous demand from the business sector.

Touching on the global oil market, the minister said since early 2017, the price of oil has risen slowly following the decision by OPEC and non-OPEC countries to cut oil production by 1.2 million barrels a day. Nonetheless, the oil prices continue to show volatility.

 

Oil prices are influenced by external factors such as the movement of US dollar, the concern over global oil producers’ commitment to cut oil production, and most recently, reports about an increase in shale oil production in the United States, among others.

 

The International Monetary Fund has estimated the average price of UK Brent Oil, Dubai Fateh and West Texas Intermediate at $51.20 a barrel in 2017 and $53.10 a barrel in 2018. Even though these oil prices are expected to stabilise, it will still be at a lower rate compared to the price of $100 a barrel three years ago.

 

According to the minister, what is certain is that as an oil producer, Brunei’s economy will continue to be influenced by global oil price movements.

 

“To support the effort to stabilise the global oil price, Brunei Darussalam, together with 10 other non-OPEC countries have agreed to participate in an OPEC/non-OPEC Joint Declaration last December 2016. Through this cooperation, the country has agreed to adjust the nation’s crude oil production starting January 1, 2017 for six months, which can be extended to another six months, depending on market situation and current prospects.

 

The minister also noted that the government will continue to take steps to control spending so that the nation’s income will be utilised to develop its economy in the long term.

 

Towards this, fiscal consolidation’ and fiscal sustainability will continue to be the fulcrum of the government’s financial management.

 

In the budget speech, the minister also announced that in line with the effort to transform the nation’s national expenditure system, as a continuation to the introduction of Programme and Performance Budgeting (PPB) for the 2016-2017 budget, the government will carry out another change starting April 1, 2017, whereby the ordinary expenditure will be combined with the national development programme expenditure, and the special expenditure category will be ended. Combining the two is expected to increase efficiency and effectiveness in the distribution and monitoring process of government allocation, especially spending on operational and non-operational expenditure.

 

“Taking into account the fiscal position of the country that is facing the challenge of a high deficit for the financial year 2016-2017, the government will continue to actively increase efforts in reducing the level of deficit in its spending.

 

“This step is aimed to create enough ‘fiscal space’, so the government expenditure can be channelled towards supporting the economic activities that have been identified. The aim of this programme is in line and in tandem with the policy to diversify the nation’s economic sources, by building a strong, large and sustainable economy,” the minister said.

 

Taking into account these goals, the minister said the theme of the proposed budget for the financial year 2017-2018 is ‘Balance Spending to Support Sustainable Economic Development’.

 

The stress on balanced spending is aimed to preserve the nation’s financial integrity from being affected by the current and future economic uncertainties.

 

In implementing this year’s expenditure based on the theme, efforts to develop the non-oil and gas private sector will continue to be a priority, the minister added.

Various initiatives have been undertaken by relevant government agencies to achieve the objectives mentioned above. These include attracting foreign direct investment (FDI); intensifying the development of Government-Linked Companies (GLCs); strengthening micro, small and medium enterprises (MSMEs); assessing regulations to be updated to further boost ease of doing business, he noted, adding that through these efforts, the nation’s production and exports can be increased, especially from the non-oil and gas sector.

 

“Based on the factors mentioned above, the expected government expenditure for the financial year 2017-2018, including the allocation for development funds, is proposed to be a total of B$5,300,000,000. This sum takes into account the projection of government income for the financial year in line with the efforts in managing the spending deficit.”

 

The minister highlighted that the proposed spending is still much higher compared to the expected government income. With the fiscal balance for the financial year 2017-2018 expected to experience deficit for the fourth consecutive year, other than steps that are being taken to control government spending, efforts to increase government income must also be increased.

 

To support the theme of the 2016-2017 budget, the priority of government expenditure is based on five main focuses: Prudent spending; increasing national productivity; enhancing ease of doing business; building capacity and human capital; and preserving the welfare of the people.

 

 

Courtesy of Borneo Bulletin, 08 March 2017

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