IMF Executive Board Concludes 2012 Article IV Consultation with Brunei Darussalam

Public Information Notice (PIN) No. 12/77
July 16, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post program monitoring, and of ex post assessments of member countries with longer term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On May 14, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Brunei Darussalam.1


Brunei’s economy is dominated by the petroleum sector. Energy production, which accounts for two˗thirds of nominal GDP and 92 percent of government revenues, has allowed the government to fund high levels of social benefits and public sector employment. However, private sector development has remained limited. The government has embarked on an ambitious long term plan to diversify the economy to boost employment prospects.

Brunei continues to experience a high degree of macroeconomic stability. Real Gross Domestic Product (GDP) rose an estimated 1.9 percent, down from 2.6 percent in 2010, as supply disruptions lowered oil and gas production. The non energy sector is expected to have grown 3.0 percent in 2011, led by transportation and services sectors. An excise tax increase in late 2010 pushed CPI inflation to 2 percent in 2011, but overall price pressures remain contained. High oil and gas prices have contributed to substantial increases in both fiscal and current account surpluses.

The outlook for growth is encouraging. Real GDP Growth is projected to be 3.2 percent in 2012 and rise to 3.5 percent on average over the next five years. Over the medium term, investment is expected to accelerate in both upstream and downstream energy projects. Growth in the non energy sector will be sustained by infrastructure and housing investments, and continued expansion of transport, retail and services sectors. There is further upside potential upside potential if government policies to promote foreign direct investment and private enterprise are successful.

Risks to the economy are limited. Brunei is cushioned by its large fiscal and current account surpluses, substantial foreign assets, and the peg to the Singapore dollar. The financial sector is generally resilient, as banks have ample capital buffers and do not rely on external financing.

Executive Board Assessment

Executive Directors noted Brunei Darussalam continues to maintain a high degree of macroeconomic stability as a result of consistent implementation of prudent policies. Conservative fiscal policy has allowed the government to accumulate substantial savings for future generations, while funding high social expenditures. Directors noted that the medium term outlook is positive. Risks to the economy are limited and well managed, and the country has substantial room to absorb adverse shocks.

Directors agreed that the current prudent fiscal policy stance is appropriate. Overall spending growth will remain contained, but there will be an increase in social spending. Directors welcomed the increase in the medium term development budget, which prioritizes infrastructure investment and improvements in human capacity. Directors welcomed the authorities’ ambitious plans to reform public financial management, noting that implementation will require adequate resources.

Directors commended the authorities’ plans for wide ranging reforms to promote private sector development and diversification. They underscored that successful implementation of these reforms will be critical to generate increases in employment, investment, and productivity in the non energy private sector. Directors called for further efforts to improve the business climate, including streamlining regulatory processes.

Directors agreed that the currency board arrangement has delivered exchange rate and price stability. They noted staff’s assessment that the real exchange rate appears to be broadly in line with fundamentals.

Directors noted that the Autoriti Monetari Brunei Darussalam (AMBD) has been successful in fulfilling its core functions regarding financial stability and managing the currency board arrangement. Nevertheless, a sustained effort will be needed to strengthen its capacity to meet increasing and more complex policy challenges. In particular, the AMBD should, in the context of a well sequenced financial sector reform program, work toward building a macroprudential policy framework, and improve the payments system and money market infrastructure. Directors encouraged the authorities to address the remaining Anti-money laundering - combating the financing of terrorism (AML/CFT) deficiencies.Directors welcomed the progress in improving the compilation and dissemination of macroeconomic data, and reporting timely real sector data. Further efforts will be necessary to ensure that the statistical framework can support more detailed policy analysis, including on taxes and subsidies.

Brunei Darussalam: Selected Economic Indicators, 2008–12





    Est. Proj.




2008 2009 2010 2011 2012

Output and prices

(Annual percent change, unless otherwise indicated)

Nominal GDP (in millions of Brunei dollars)

20,398 15,611 16,867 19,538 21,675

Real GDP

1.9 1.8 2.6 1.9 3.2

Energy sector GDP

6.2 4.6 2.2 0.6 1.8

Nonenergy GDP

2.4 0.9 3.0 3.0 4.3

Consumer prices (period average)

2.1 1.0 0.4 2.0 1.6

Public finances: budgetary central government1/

(In percent of GDP)


70.1 42.5 48.6 65.6 68.9

Oil and gas

64.9 36.8 43.3 59.9 64.6

Non oil and gas

5.2 5.7 5.3 5.6 4.3


30.1 38.7 40.1 33.7 34.0


25.2 30.1 29.0 25.6 26.1


5.0 8.6 11.1 8.1 7.9

Overall primary balance

40.0 3.8 8.5 31.9 34.9

Overall primary balance excluding royalties2/

38.8 3.8 8.5 30.1 34.9

Nonenergy overall primary deficit2/

19.1 28.4 29.8 23.9 23.6

Money and banking

(12 month percent change)

Claims on private sector (end period)

3.7 3.0 1.2

Narrow money (end period)

13.9 22.9 29.2

Broad money (end period)

9.6 9.7 4.8

Balance of payments

(In millions of U.S. dollars, unless otherwise indicated)

Trade balance

7,840 4,889 6,439 9,832 10,843


10,698 7,172 8,770 12,532 13,839

Of which: Oil and gas

10,331 6,878 8,472 12,216 13,512


2,858 2,282 2,331 2,700 2,996

Services (net)

535 519 558 587 623

Income (net)3/

171 385 217 325 695

Current transfers

420 445 475 499 529

Current account balance

7,056 4,310 5,623 8,421 8,997

In percent of GDP

49.0 40.2 45.5 54.2 52.6

Gross official reserves4/

751 1,357 1,563 1,761 1,814

Foreign exchange cover of currency issued (in percent)4/

110.9 146.5 152.6 152.6 152.6


Brunei dollars per U.S. dollar (period average)

1.42 1.45 1.36 1.26

Sources: Data provided by the Brunei authorities; and IMF staff estimates.

1/ On a calendar year basis; excludes interest and investment income.


2/ Excludes collection and disbursement of royalties and capital transfers.

3/ Fund staff estimates.


4/ Comprises foreign exchange assets of Autoriti Monetari Brunei Darussalam (Brunei Currency and Monetary Board prior 2011), SDR holdings, and reserve position in the Fund.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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