## BRUNEI DARUSSALAM: STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION

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### Context and recent developments
- COVID-19 waves (Delta in August 2021; Omicron in 2022) led to substantial increases in cases—new cases declined to 535 cases per million people as of end-May 2022.
- Partial lockdowns reintroduced in August 2021 led to wholesale and retail trade activity decline of −4.3 percent y/y in 2021Q3.
- Service sector: grew 2.1 percent y/y in Q4 2021 after many restrictions were removed from mid-November and vaccination progress.
- Oil and gas (O&G) mining sector production: declined by 3 percent y/y in 2021 due to maintenance work stoppages and COVID-19 restrictions.
- LNG manufacturing: declined by 10.6 percent y/y in 2021, largely due to diversion of gas supply to other downstream activities.
- Agriculture, forestry and fishery sector: increased by 16.9 percent y/y in 2021.
- Hires of local residents: declined by 4.4 percent in 2021; declines stronger for young and less-educated workers and in wholesale and retail trade and professional and technical activities.
- CPI inflation: reached 3.8 percent by March 2022, driven by food (3.8 percent growth y/y) and transport including airfares (6 percent growth y/y).

### Growth outcomes and projections
- Real GDP: contracted by 1.6 percent in 2021; projected to rebound to 1.2 percent (staff) / authorities expect 0.4–0.8 percent in 2022.
- Selected projections and historical indicators (exact values provided):
  - Nominal GDP (millions of Brunei dollars): 2017: 16,748; 2018: 18,301; 2019: 18,375; 2020: 16,564; 2021: 18,822; 2022: 25,355; 2023: 24,699; 2024: 24,783; 2025: 25,060; 2026: 25,400; 2027: 26,092.
  - Real GDP (percentage change): 2017: 1.3; 2018: 0.1; 2019: 3.9; 2020: 1.1; 2021: −1.6; 2022: 1.3; 2023: 3.3; 2024: 3.2; 2025: 3.2; 2026: 2.5; 2027: 3.4.
  - Oil production ('000 barrels/day): 2017: 113; 2018: 112; 2019: 121; 2020: 110; 2021: 106; 2022: 104; 2023: 103; 2024: 109; 2025: 114; 2026: 120; 2027: 124.
  - Natural gas output (millions BTUs/day): 2017: 1,430; 2018: 1,372; 2019: 1,402; 2020: 1,359; 2021: 1,234; 2022: 1,184; 2023: 1,222; 2024: 1,234; 2025: 1,259; 2026: 1,247; 2027: 1,296.
  - Average Brunei oil price (U.S. dollars per barrel): 2017: 55.9; 2018: 73.2; 2019: 68.6; 2020: 43.1; 2021: 72.7; 2022: 86.0; 2023: 83.6; 2024: 71.6; 2025: 68.3; 2026: 63.8; 2027: 62.2.
  - Consumer prices (period average, percentage change): 2017: −1.3; 2018: 1.0; 2019: −0.4; 2020: 1.9; 2021: 1.7; 2022: 2.5; 2023: 2.0; 2024: 1.5; 2025: 1.0; 2026: 1.0; 2027: 1.0.

### External sector, reserves, and balance of payments
- Exports (millions): 2017: 5,475; 2018: 6,448; 2019: 7,213; 2020: 6,541; 2021: 7,908; 2022: 14,078; 2023: 11,285; 2024: 11,662; 2025: 12,011; 2026: 12,365; 2027: 12,846.
  - Of which oil and gas (millions): 2017: 5,021; 2018: 2,691; 2019: 3,244; 2020: 2,943; 2021: 4,446; 2022: 8,329; 2023: 4,512; 2024: 4,734; 2025: 4,916; 2026: 4,946; 2027: 5,036.
- Imports (millions): 2017: 3,072; 2018: 4,089; 2019: 5,001; 2020: 5,176; 2021: 8,169; 2022: 11,615; 2023: 10,255; 2024: 9,839; 2025: 9,621; 2026: 9,498; 2027: 9,540.
- Current Account Balance (millions): 2017: 1,984; 2018: 937; 2019: 895; 2020: 514; 2021: 644; 2022: 2,080; 2023: 1,747; 2024: 2,056; 2025: 2,314; 2026: 2,450; 2027: 2,635.
- Current Account Balance (percent of GDP): 2017: 16.4; 2018: 6.9; 2019: 6.6; 2020: 4.3; 2021: 4.6; 2022: 11.1; 2023: 10.2; 2024: 12.0; 2025: 13.3; 2026: 14.0; 2027: 14.6.
- Gross Official Reserves (millions): 2017: 3,300; 2018: 3,221; 2019: 4,052; 2020: 3,721; 2021: 4,242; 2022: 4,952; 2023: 5,562; 2024: 5,674; 2025: 5,786; 2026: 5,898; 2027: 6,010.
- Reserves in months of next year's imports: 2017: 7.0; 2018: 5.7; 2019: 7.6; 2020: 4.7; 2021: 4.0; 2022: 5.1; 2023: 6.0; 2024: 6.2; 2025: 6.4; 2026: 6.5; 2027: 6.6.

### Fiscal outlook and public finances
- Total revenue (percent of GDP): 2017: 22.7; 2018: 32.7; 2019: 26.4; 2020: 12.6; 2021: 23.2; 2022: 23.7; 2023: 21.6; 2024: 20.8; 2025: 20.3; 2026: 19.7; 2027: 19.6.
  - Oil and gas revenue (percent of GDP): 2017: 17.5; 2018: 26.4; 2019: 19.8; 2020: 7.7; 2021: 19.6; 2022: 20.2; 2023: 17.9; 2024: 17.0; 2025: 16.3; 2026: 15.6; 2027: 15.4.
  - Other revenue (percent of GDP): 2017: 5.3; 2018: 6.3; 2019: 6.5; 2020: 5.0; 2021: 3.6; 2022: 3.5; 2023: 3.7; 2024: 3.9; 2025: 4.0; 2026: 4.1; 2027: 4.2.
- Total Expenditure (percent of GDP): 2017: 35.6; 2018: 32.5; 2019: 31.9; 2020: 32.6; 2021: 27.8; 2022: 22.7; 2023: 23.2; 2024: 23.3; 2025: 23.3; 2026: 23.1; 2027: 22.7.
  - Current expenditure (percent of GDP): 2017: 30.4; 2018: 29.8; 2019: 29.5; 2020: 31.3; 2021: 26.8; 2022: 21.9; 2023: 22.3; 2024: 22.3; 2025: 22.2; 2026: 22.0; 2027: 21.7.
  - Capital expenditure (percent of GDP): 2017: 5.2; 2018: 2.7; 2019: 2.4; 2020: 1.3; 2021: 1.0; 2022: 0.9; 2023: 0.9; 2024: 1.0; 2025: 1.0; 2026: 1.0; 2027: 1.0.
- Overall balance (percent of GDP): 2017: −12.9; 2018: 0.2; 2019: −5.6; 2020: −19.9; 2021: −4.6; 2022: 1.0; 2023: −1.6; 2024: −2.5; 2025: −2.9; 2026: −3.4; 2027: −3.1.
- Non-oil and Gas Balance (percent of GDP): 2017: −60.0; 2018: −53.5; 2019: −49.5; 2020: −46.0; 2021: −42.4; 2022: −34.6; 2023: −32.9; 2024: −31.5; 2025: −30.2; 2026: −29.0; 2027: −27.8.

### Fiscal developments in FY2021/22 (key figures)
- Overall fiscal balance (FY basis): FY2017/18: −12.9; FY2018/19: 0.2; FY2019/20: −5.6; FY2020/21: −19.9; FY2021/22: −4.6.
- Revenue (percent of GDP, FY): FY2017/18: 22.7; FY2018/19: 32.7; FY2019/20: 26.4; FY2020/21: 12.6; FY2021/22: 23.2.
  - Oil & Gas component (FY): FY2017/18: 17.5; FY2018/19: 26.4; FY2019/20: 19.8; FY2020/21: 7.7; FY2021/22: 19.6.
  - Non-Oil & Gas component (FY): FY2017/18: 5.3; FY2018/19: 6.3; FY2019/20: 6.5; FY2020/21: 5.0; FY2021/22: 3.6.
- Expenditure (percent of GDP, FY): FY2017/18: 35.6; FY2018/19: 32.5; FY2019/20: 31.9; FY2020/21: 32.6; FY2021/22: 27.8.
  - Current expenditure (FY): FY2017/18: 30.4; FY2018/19: 29.8; FY2019/20: 29.5; FY2020/21: 31.3; FY2021/22: 26.8.
  - Capital expenditure (FY): FY2017/18: 5.2; FY2018/19: 2.7; FY2019/20: 2.4; FY2020/21: 1.3; FY2021/22: 1.0.
- Nominal GDP (millions of BND, FY): FY2017/18: 17,048; FY2018/19: 18,453; FY2019/20: 18,385; FY2020/21: 16,241; FY2021/22: 20,455.
- Specific FY2021/22 fiscal changes:
  - Revenue rose to BND4.7 billion from BND2.1 billion in FY2020/21 owing to sharp rise of oil and LNG prices.
  - Expenditure expanded by about 7 percent: from BND5.3 billion in FY2020/21 to BND5.7 billion in FY2021/22.
  - About BND182 million (0.9 percent of the GDP) used for COVID-19 containment measures.

### Risks to the outlook
- Downside risks:
  - Potential new COVID-19 variants.
  - Increased global uncertainty from an escalation of the war in Ukraine.
  - Monetary tightening from the US and major central banks.
  - A larger-than-expected growth slowdown in China.
  - Delays in large-scale FDI or unexpected changes in energy production.
- Upside possibility:
  - Persistently higher energy prices improving terms of trade, restoring fiscal positions in the short term and helping build buffers.

### Main policy recommendations (short- to medium-term)
- Short-term support and recovery:
  - Continue targeted fiscal support—leveraging Brunei’s ample fiscal reserves with virtually no public debt—to alleviate pandemic effects on vulnerable businesses and households.
  - Maintain targeted support in the near term while stepping up fiscal reforms for longer-term sustainability and intergenerational equity.
- Fiscal sustainability and reform:
  - Advance reforms to improve fiscal sustainability and intergenerational equity.
  - Fully implement the medium-term fiscal framework to help stabilize public finances.
  - Improve efficiency of public spending, streamline untargeted subsidy and social spending, rationalize public employment, and mobilize revenue.
  - Consider adoption of a fiscal rule (e.g., non-hydrocarbon primary balance-to non-hydrocarbon GDP target).
- Revenue and consolidation measures:
  - Expand excise taxes on goods with negative externalities; broaden tax system with recalibration of property tax, adoption of GSTs and a carbon tax; active asset management on government lands and buildings.
  - Contain public employment and wages; public wages have exceeded 30 percent of government expenditure since FY2015/16.
  - Preserve and expand capital spending execution despite FY2022/23 cuts—FY2022/23 budget reduced expenditure by 2.7 percent and capital spending by about 41.7 percent in the transition from BND0.60 billion to BND0.35 billion.
  - Adjustment scenario: substantial reforms of fuel subsidies, public wages and wide-scale revenue mobilization could lead to fiscal saving of about 5.5 percent of GDP in the medium term.
- Monetary and financial sector:
  - Remove pandemic relief measures to the financial sector; monetary liquidity operations should be mindful of inflation risks.
  - Strengthen AML/CFT regulatory and supervisory framework, implement the Basel III framework, and upgrade stress testing.
  - Foster financial deepening to spur private sector development, including improving credit provision to MSMEs.
- Structural and diversification policies:
  - Ramp up economic diversification beyond oil and gas by expanding the export portfolio and attracting quality FDIs.
  - Develop human capital and MSMEs; support digital and green growth.
  - Continue to attract large FDIs in sectors such as oil refinery and increase investments in strategic industries such as agriculture and O&G downstream sectors.
- Labor market and skills:
  - Strengthen job matching and job training (e.g., JobCentre Brunei, i-Ready apprenticeship program, SkillsPlus program).
- Climate and green transition:
  - Promptly implement BNCCP; mainstream climate-related projects into fiscal framework.
  - Expedite fuel subsidy reform to mitigate climate change and relieve fiscal burden.
  - Solar capacity: expanded from 1.42MW in 2020 to 5.42MW in 2021.
- Data and capacity building:
  - Further improve data compilation and dissemination; continue IMF Capacity Development cooperation.

### Monetary policy, financial stability, and banking sector
- Exchange arrangement: peg to the Singapore dollar via Currency-Interchangeability Agreement remains appropriate.
- BDCB actions: overnight standing facilities, lowered overnight liquidity provision rate from 1.75 to 1 percent after the pandemic; recent increases in standing facility rates responding to higher inflation outlook and MAS tightening.
- Banking sector soundness:
  - Capital ratio: over 20 percent of risk-weighted assets by end-2021 (Regulatory capital to risk-weighted assets: 20.2 (2021)).
  - NPL ratio: declined from 4.7 percent in 2020 to 3.6 percent in 2021 (NPL to total loans: 3.1 (2021) reported elsewhere).
  - Bank credit grew 4.6 percent in 2021; private sector credit around 40 percent of GDP.
  - Banking sector balance sheets expanded by 5.8 percent y/y in 2021; liquidity ratios remain high though declined to about 80 percent at end-2021 from close to 140 percent a decade earlier.
- Financial sector reform priorities:
  - Implement Basel III liquidity standard in 2022, enhance macroprudential framework and stress testing, strengthen AML/CFT (legislative amendments expected in 2022), and develop secondary bond market and stock exchange.

### Diversification, MSMEs, and structural reforms
- Export concentration: O&G exports constitute over 80 percent of total exports.
- Export diversification analysis (machine-learning collaborative filtering) identifies priority sectors: Food & live animals, Chemicals & related products, Machinery & transport equipment.
- Top algorithm-recommended products include Non-Gold Coin (9610 — 84.16), Liquified Petroleum Gases (3413 — 43.41), Miscellaneous Machinery (7239 — 0.68), Acyclic Alcohols (5121 — 13.59), among others (full list of 55 SITC 4-digit recommendations provided in source).
- Estimated gains from improved alignment: reaching UAE similarity score could raise annual GDP per capita growth by 1.6 percentage points and reduce 5-year growth volatility by 0.5 percentage point.
- MSME policy priorities:
  - Prepare a comprehensive national MSME strategy; scale up finance (Bank Usahawan, DARe programs), expand market access, foster digitalization, improve coordination and customize assistance.
  - Example program metrics: Bootcamps created 276 start-ups with 825 job opportunities; Bank Usahawan loan was 0.15 percent of total bank loans in 2019 per source.

### Authorities’ positions and implementation status
- Authorities broadly agreed with fiscal recommendations and emphasized making public finance more efficient while supporting private sector development.
- Authorities plan to implement fiscal consolidation, contain subsidies, adjust electricity and water tariffs, consolidate subsidies data, implement national pension scheme in 2023, corporatize government services, and launch excise taxes on goods harmful to the environment and health.
- Authorities expect growth of 0.4–0.8 percent in 2022 and prefer conservative projection of terms-of-trade shock impact.
- Authorities committed to retiring COVID relief measures in the financial sector; only 2 percent of bank loans use repayment deferment as of reporting.

### Executive Board Assessment (summarized)
- Directors commended policies to cushion pandemic impact and vaccination rollout.
- Directors observed a strong recovery underway driven by lifting restrictions, investment in large petrochemicals projects, and higher oil and gas prices.
- Directors stressed maintaining supportive policies until a private sector-led recovery is on firm path and continuing reforms to promote transformation, resilience, and green, digital, and inclusive growth.
- Directors concurred the peg to the Singapore dollar remains appropriate and encouraged continued diversification, export expansion, attraction of quality FDI, business environment improvements, human capital investment, MSME development, and improved data management.

*Source: IMF staff report for the 2022 Article IV consultation (data and text as provided in the supplied content).*

### 2021. Reduced activities in mining and LNG manufacturing, combined with the negative

### BRUNEI DARUSSALAM: STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION

### Context and recent developments
- New COVID-19 waves (Delta in August 2021; Omicron in 2022) led to substantial increases in cases—new cases declined to 535 cases per million people as of end-May 2022.
- Partial lockdowns reintroduced in August 2021 negatively affected wholesale and retail trade activity in 2021Q3 (−4.3 percent decline y/y).
- Service sector growth recovered in Q4 2021 (service sector grew 2.1 percent y/y) after removal of many restrictions from mid-November and strong vaccination progress.
- Oil and gas (O&G) mining sector production declined by 3 percent y/y in 2021 due to maintenance work stoppages and COVID-19 restrictions.
- LNG manufacturing declined by 10.6 percent y/y in 2021, largely due to diversion of gas supply to other downstream activities.
- Downstream non-O&G sector activity declined slightly in 2021 following exceptional growth (324 percent y/y) in 2020.
- Agriculture, forestry and fishery sector activity increased by 16.9 percent y/y in 2021, driven by expansion in the livestock subsector and fisheries.
- Some non-O&G manufacturing subsectors (e.g., textile) rebounded strongly after sharp contraction in 2020.
- Despite diversification gains, the share of agriculture and non-O&G manufacturing (excluding downstream activities) in total GDP remains small at around 2 percent.
- Hires of local residents declined by 4.4 percent in 2021; declines were stronger for young and less-educated workers and in wholesale and retail trade and professional and technical activities.
- CPI inflation reached 3.8 percent by March 2022, driven by higher food prices (3.8 percent growth y/y) and higher transport costs including airfares (6 percent growth y/y).

### Growth outcomes and projections
- Real GDP contracted by 1.6 percent in 2021.
- For 2022, growth is projected to rebound to 1.2 percent on easing mobility constraints and a positive terms of trade shock due to surges in O&G prices.
- Selected historical and projected indicators (excerpt):
  - Nominal GDP (millions of Brunei dollars): 2017: 16,748; 2018: 18,301; 2019: 18,375; 2020: 16,564; 2021: 18,822; 2022: 25,355; 2023: 24,699; 2024: 24,783; 2025: 25,060; 2026: 25,400; 2027: 26,092.
  - Real GDP (percentage change): 2017: 1.3; 2018: 0.1; 2019: 3.9; 2020: 1.1; 2021: −1.6; 2022: 1.3; 2023: 3.3; 2024: 3.2; 2025: 3.2; 2026: 2.5; 2027: 3.4.
  - Oil and gas sector GDP (percentage change): 2017: 1.1; 2018: −1.5; 2019: 3.9; 2020: −4.9; 2021: −4.8; 2022: −2.9; 2023: 1.9; 2024: 2.6; 2025: 2.7; 2026: 1.4; 2027: 3.4.
  - Non-oil and gas sector GDP (percentage change): 2017: 1.6; 2018: 2.1; 2019: 3.9; 2020: 8.9; 2021: 2.0; 2022: 5.5; 2023: 4.6; 2024: 3.7; 2025: 3.5; 2026: 3.4; 2027: 3.3.
  - Oil production ('000 barrels/day): 2017: 113; 2018: 112; 2019: 121; 2020: 110; 2021: 106; 2022: 104; 2023: 103; 2024: 109; 2025: 114; 2026: 120; 2027: 124.
  - Natural gas output (millions BTUs/day): 2017: 1,430; 2018: 1,372; 2019: 1,402; 2020: 1,359; 2021: 1,234; 2022: 1,184; 2023: 1,222; 2024: 1,234; 2025: 1,259; 2026: 1,247; 2027: 1,296.
  - Average Brunei oil price (U.S. dollars per barrel): 2017: 55.9; 2018: 73.2; 2019: 68.6; 2020: 43.1; 2021: 72.7; 2022: 86.0; 2023: 83.6; 2024: 71.6; 2025: 68.3; 2026: 63.8; 2027: 62.2.
  - Consumer prices (period average, percentage change): 2017: −1.3; 2018: 1.0; 2019: −0.4; 2020: 1.9; 2021: 1.7; 2022: 2.5; 2023: 2.0; 2024: 1.5; 2025: 1.0; 2026: 1.0; 2027: 1.0.

### External sector and reserves
- Goods balance (millions): 2017: 2,404; 2018: 2,358; 2019: 2,212; 2020: 1,365; 2021: −261; 2022: 2,464; 2023: 1,030; 2024: 1,824; 2025: 2,390; 2026: 2,867; 2027: 3,306.
- Exports (millions): 2017: 5,475; 2018: 6,448; 2019: 7,213; 2020: 6,541; 2021: 7,908; 2022: 14,078; 2023: 11,285; 2024: 11,662; 2025: 12,011; 2026: 12,365; 2027: 12,846.
  - Of which: oil and gas (millions): 2017: 5,021; 2018: 2,691; 2019: 3,244; 2020: 2,943; 2021: 4,446; 2022: 8,329; 2023: 4,512; 2024: 4,734; 2025: 4,916; 2026: 4,946; 2027: 5,036.
- Imports (millions): 2017: 3,072; 2018: 4,089; 2019: 5,001; 2020: 5,176; 2021: 8,169; 2022: 11,615; 2023: 10,255; 2024: 9,839; 2025: 9,621; 2026: 9,498; 2027: 9,540.
- Current Account Balance (millions): 2017: 1,984; 2018: 937; 2019: 895; 2020: 514; 2021: 644; 2022: 2,080; 2023: 1,747; 2024: 2,056; 2025: 2,314; 2026: 2,450; 2027: 2,635.
- Current Account Balance (in percent of GDP): 2017: 16.4; 2018: 6.9; 2019: 6.6; 2020: 4.3; 2021: 4.6; 2022: 11.1; 2023: 10.2; 2024: 12.0; 2025: 13.3; 2026: 14.0; 2027: 14.6.
- Gross Official Reserves (millions): 2017: 3,300; 2018: 3,221; 2019: 4,052; 2020: 3,721; 2021: 4,242; 2022: 4,952; 2023: 5,562; 2024: 5,674; 2025: 5,786; 2026: 5,898; 2027: 6,010.
- Reserves in months of next year's imports: 2017: 7.0; 2018: 5.7; 2019: 7.6; 2020: 4.7; 2021: 4.0; 2022: 5.1; 2023: 6.0; 2024: 6.2; 2025: 6.4; 2026: 6.5; 2027: 6.6.

### Fiscal outlook and public finances
- Total revenue (percent of GDP): 2017: 22.7; 2018: 32.7; 2019: 26.4; 2020: 12.6; 2021: 23.2; 2022: 23.7; 2023: 21.6; 2024: 20.8; 2025: 20.3; 2026: 19.7; 2027: 19.6.
  - Oil and gas revenue (percent of GDP): 2017: 17.5; 2018: 26.4; 2019: 19.8; 2020: 7.7; 2021: 19.6; 2022: 20.2; 2023: 17.9; 2024: 17.0; 2025: 16.3; 2026: 15.6; 2027: 15.4.
  - Other revenue (percent of GDP): 2017: 5.3; 2018: 6.3; 2019: 6.5; 2020: 5.0; 2021: 3.6; 2022: 3.5; 2023: 3.7; 2024: 3.9; 2025: 4.0; 2026: 4.1; 2027: 4.2.
- Total Expenditure (percent of GDP): 2017: 35.6; 2018: 32.5; 2019: 31.9; 2020: 32.6; 2021: 27.8; 2022: 22.7; 2023: 23.2; 2024: 23.3; 2025: 23.3; 2026: 23.1; 2027: 22.7.
  - Current expenditure (percent of GDP): 2017: 30.4; 2018: 29.8; 2019: 29.5; 2020: 31.3; 2021: 26.8; 2022: 21.9; 2023: 22.3; 2024: 22.3; 2025: 22.2; 2026: 22.0; 2027: 21.7.
  - Capital expenditure (percent of GDP): 2017: 5.2; 2018: 2.7; 2019: 2.4; 2020: 1.3; 2021: 1.0; 2022: 0.9; 2023: 0.9; 2024: 1.0; 2025: 1.0; 2026: 1.0; 2027: 1.0.
- Overall balance (percent of GDP) 2/: 2017: −12.9; 2018: 0.2; 2019: −5.6; 2020: −19.9; 2021: −4.6; 2022: 1.0; 2023: −1.6; 2024: −2.5; 2025: −2.9; 2026: −3.4; 2027: −3.1.
- Non-oil and Gas Balance (percent of GDP): 2017: −60.0; 2018: −53.5; 2019: −49.5; 2020: −46.0; 2021: −42.4; 2022: −34.6; 2023: −32.9; 2024: −31.5; 2025: −30.2; 2026: −29.0; 2027: −27.8.

### Risks to the outlook
- Downside risks:
  - Potential new COVID-19 variants.
  - Increased global uncertainty associated with an escalation of the war in Ukraine.
  - Monetary tightening from the US.
  - A larger-than-expected growth slowdown in China.
- Upside possibility:
  - Higher energy prices would further improve the terms of trade and restore fiscal positions in the short term, while partially contributing to build the buffers needed to ensure stronger intergenerational equity.

### Main policy recommendations
- Short-term support and recovery:
  - Continue targeted fiscal support—leveraging Brunei’s ample fiscal reserves with virtually no public debt—to alleviate pandemic effects on vulnerable businesses and households.
  - Maintain targeted fiscal support for vulnerable businesses and households in the near term, while stepping up fiscal reforms for longer-term fiscal sustainability and intergenerational equity.
- Fiscal sustainability and reform:
  - Advance reforms to improve fiscal sustainability and intergenerational equity.
  - Fully implement the medium-term fiscal framework to help stabilize public finances.
  - Improve efficiency of public spending, streamline untargeted subsidy and social spending, rationalize public employment, and mobilize revenue.
- Monetary and financial sector measures:
  - Remove pandemic relief measures to the financial sector.
  - Monetary liquidity operations should be mindful of inflation risks.
  - Strengthen AML/CFT regulatory and supervisory framework, implement the Basel III framework, and upgrade stress testing.
  - Foster financial deepening to spur private sector development.
- Structural and diversification policies:
  - Ramp up economic diversification beyond oil and gas by expanding the export portfolio and attracting quality FDIs.
  - Develop human capital and MSMEs to lay the foundation for higher potential growth.
  - Support digital and green growth to strengthen long-term resilience.
  - Continue to attract large FDIs in sectors such as oil refinery and increase investments in strategic industries such as agriculture and O&G downstream sectors.
- Labor market and skills:
  - Strengthen job matching and job training (e.g., JobCentre Brunei, i-Ready apprenticeship program, SkillsPlus program) to upskill and reskill the workforce to meet private sector demand.
- Data and capacity building:
  - Further improve data compilation and dissemination.
  - Continue Capacity Development cooperation with the IMF; authorities plan to request further CD.

### Executive Board Assessment (summarized)
- Directors commended authorities for policies cushioning the pandemic impact and for the vaccination rollout.
- Directors observed a strong economic recovery underway driven by lifting COVID-19 restrictions, investment in large petrochemicals projects, and higher oil and gas prices.
- Directors stressed maintaining supportive policies until a private sector-led recovery is on a firm path and continuing reforms to promote economic transformation, resilience, and green, digital, and inclusive growth.
- Directors concurred the peg to the Singapore dollar remains appropriate and encouraged continued diversification, export expansion, attraction of quality FDI, business environment improvements, human capital investment, and MSME development.
- Directors welcomed measures to improve data management and close cooperation in Capacity Development with the IMF.

*Source: IMF staff report for the 2022 Article IV consultation (data and text as provided in the supplied content).*

### 6.      The fiscal deficit has declined to 4.6 percent of GDP in FY2021/22 from 19.9 percent in

### 6.      The fiscal deficit has declined to 4.6 percent of GDP in FY2021/22 from 19.9 percent in

### Fiscal developments and key statistics
- Overall fiscal balance:
  - FY2017/18: -12.9
  - FY2018/19: 0.2
  - FY2019/20: -5.6
  - FY2020/21: -19.9
  - FY2021/22: -4.6
- Revenue (millions of BND):
  - FY2017/18: 22.7
  - FY2018/19: 32.7
  - FY2019/20: 26.4
  - FY2020/21: 12.6
  - FY2021/22: 23.2
  - Oil & Gas component:
    - FY2017/18: 17.5
    - FY2018/19: 26.4
    - FY2019/20: 19.8
    - FY2020/21: 7.7
    - FY2021/22: 19.6
  - Non-Oil & Gas component:
    - FY2017/18: 5.3
    - FY2018/19: 6.3
    - FY2019/20: 6.5
    - FY2020/21: 5.0
    - FY2021/22: 3.6
- Expenditure (millions of BND):
  - FY2017/18: 35.6
  - FY2018/19: 32.5
  - FY2019/20: 31.9
  - FY2020/21: 32.6
  - FY2021/22: 27.8
  - Current expenditure:
    - FY2017/18: 30.4
    - FY2018/19: 29.8
    - FY2019/20: 29.5
    - FY2020/21: 31.3
    - FY2021/22: 26.8
  - Capital expenditure:
    - FY2017/18: 5.2
    - FY2018/19: 2.7
    - FY2019/20: 2.4
    - FY2020/21: 1.3
    - FY2021/22: 1.0
- Nominal GDP (millions of BND):
  - FY2017/18: 17,048
  - FY2018/19: 18,453
  - FY2019/20: 18,385
  - FY2020/21: 16,241
  - FY2021/22: 20,455
- Nominal non-O&G GDP (millions of BND):
  - FY2017/18: 7,938
  - FY2018/19: 8,103
  - FY2019/20: 8,418
  - FY2020/21: 9,098
  - FY2021/22: 10,382
- Specific fiscal developments in FY2021/22:
  - Revenue rose to BND4.7 billion from BND2.1 billion in FY2020/21, owing to the sharp rise of oil and LNG prices.
  - Expenditure level expanded by about 7 percent: from BND5.3 billion in FY2020/21 to BND5.7 billion in FY2021/22.
  - About BND182 million (0.9 percent of the GDP) was used for COVID-19 containment measures (testing laboratories, vaccines, isolation facilities, food supplies for people under quarantine and allowances for frontliners).
  - Remaining spending increases included discounts on corporate income tax, rents and utilities, deferment of pension contributions, payroll subsidies to affected MSMEs, and financial assistance to local employees and self-employed.

### External sector and banking system
- Current account:
  - 2020: current account surplus estimated at 4.5 percent of GDP.
  - 2021: current account surplus estimated at 4.6 percent of GDP.
  - Non-O&G exports exceeded O&G exports in 2021 to 54.9 percent of total exports.
- Reserves and SDR:
  - Brunei’s SDR allocation in 2021: US$412 million.
  - Brunei’s reserves (excluding gold) stood at around 210 percent of the Fund’s assessing reserves adequacy (ARA) composite metric in 2021.
  - The entire SDR allocation is currently saved as reserves.
- Banking system measures:
  - Capital ratio: over 20 percent of risk-weighted assets by end-2021.
  - NPL ratio: declined from 4.7 percent in 2020 to 3.6 percent in 2021.
  - Private sector credit: picked up in H2 2020, dropped again in H2 2021.

### Outlook and risks
- Growth projections:
  - 2022: growth projected to rebound to 1.2 percent.
  - Medium term: reach 3.5 percent as new oil production capacities come online.
  - Share of non-O&G projected to rise to 54 percent of GDP by 2027.
- Labor market:
  - Expectation of pickup in 2022 with easing of travel restrictions; structural issues remain (shortage of high-skilled workers, frequent turnovers of local employees).
- Inflation:
  - 2022 headline inflation projected at 2.5 percent.
- Fiscal outlook:
  - FY2022/23: fiscal surplus of 1.0 percent of GDP expected due to higher energy prices.
  - Expenditure-to-GDP ratio expected to stay at about 23 percent in FY2022/23.
  - Revenues projected to decline from FY2023/24 with falling energy prices; fiscal balance projected to return to deficit in FY2023/24.
  - Without substantial fiscal consolidation, fiscal deficit expected to increase to 3.1 percent of GDP in FY2027/28.
- Current account projections:
  - 2022-23: current account surplus expected to rise to about 11 percent of GDP.
  - By 2027: projected to stabilize at about 15 percent of GDP.
- Downside risks:
  - Outbreaks of lethal/highly contagious COVID variants, persistently higher worldwide inflation, monetary tightening from US and major central banks, abrupt slowdown in China, escalation of the war in Ukraine, unexpected changes in energy production, delays in large-scale FDI.
- Upside risk:
  - Persistently higher energy prices improving terms of trade and domestic demand.

### Policy recommendations and reform priorities
- Short-term macro policy:
  - Continue macroeconomic policy support until the output gap is closed and recovery is entrenched, leveraging ample fiscal reserves with virtually no public debt to sustain private demand.
- Medium-term fiscal strategy:
  - Normalize fiscal policy as high energy prices restore fiscal space.
  - Advance implementation of measures to strengthen fiscal sustainability, rebalance external position, and improve intergenerational equity.
  - Prepare exit plans for fiscal support and gear support toward reallocation of resources to green and digital sectors.
- Fiscal consolidation measures:
  - Projected gap under PIH: about 3.1 percent of non-O&G GDP (1.8 percent of GDP) in 2027 — requires sustained medium-term fiscal consolidation through cutting inefficient spending and expanding revenue base delinked from O&G.
  - FY2022/23 budget reduced expenditure by 2.7 percent (from BND5.86 billion to BND5.70 billion), largely via capital spending cuts of about 41.7 percent (from BND0.60 billion to BND0.35 billion); recommendation to preserve and expand capital spending and execute capital expenditure without delay.
  - Contain public employment and wages; public wages have exceeded 30 percent of government expenditure since FY2015/16.
  - Reform untargeted subsidies and social spending: target assistance to most vulnerable, streamline redundant assistance, bolster coordination among fragmented agencies, consider contributory schemes for some services; new pension scheme increasing employer’s contribution rate to be implemented in 2023.
  - Revenue mobilization: expand excise taxes on goods with negative externalities; broaden tax system with recalibration of property tax, adoption of GSTs and a carbon tax; active asset management on government lands and buildings.
  - Privatization/PPP and GLC performance: accelerate privatization and PPPs, improve performance and transparency of Darussalam Assets, SDC Fund, and GLCs; privatization of some GLCs to reduce barriers to entry and raise fiscal revenues.
  - Adjustment scenario: substantial reforms of fuel subsidies, public wages and wide-scale revenue mobilization could lead to fiscal saving of about 5.5 percent of GDP in the medium term.
- Public finance management:
  - Fully implement the Medium-Term Fiscal Framework (MTFF) and develop a contingency plan for energy price disruptions.
  - Consider adoption of a fiscal rule (e.g., non-hydrocarbon primary balance-to non-hydrocarbon GDP target).
  - Improve public investment management via PIMA and digitalization (Treasury Single Account, Enterprise Resource Planning, One Common Billing System).
  - Extend the One Common Portal for business obligations and implement integrated public financial management including central government, extra budgetary funds, SOEs and a sovereign fund.
  - The “Financial Regulations” introduced in 2022 expected to improve revenue collection and procurement.

### Authorities’ views
- Authorities expect economy to grow by 0.4-0.8 percent in 2022, driven by agriculture growth and services rebound.
- Authorities prefer conservative projection of the positive impact of the terms-of-trade shock, view income/wealth effects from high oil prices as limited.
- Near-term constraints include ongoing maintenance in O&G sector and potential production delay in new fertilizer sector; see possible upside if rejuvenation program increases O&G production in short term.
- Concur that inflation from higher food prices and supply-chain bottlenecks may persist longer than expected; actively working to ensure food security and support expansion of domestic food production.
- Medium-term outlook remains positive with expectations that diversification and investments in O&G downstream sectors will improve sustainability of growth.

*Source: Brunei Darussalam: IMF staff report excerpts (fiscal and economic sections).*

### 26.      The authorities broadly agreed with the fiscal policy recommendations and emphasized

### 1brnea2022002 - 26.      The authorities broadly agreed with the fiscal policy recommendations and emphasized

### Fiscal policy, public finance, and fiscal consolidation
- Authorities broadly agreed with fiscal policy recommendations and emphasized efforts to make public finance more efficient while supporting private sector development.
- Fiscal support played a significant role to help COVID-affected households and firms.
- Authorities plan to implement the fiscal consolidation program continuously, "making the most of recent high energy prices for strengthening fiscal sustainability."
- Authorities expressed commitment to containing subsidies even in the face of higher oil and food prices and abundant oil and gas revenues.
- Measures and reforms under discussion or implementation:
  - Adjust tariffs of electricity and water.
  - Consolidate subsidies data across line-ministries through the Treasury Accounting and Financial Information System 2.0.
  - Implement a new national pension scheme in 2023, expected to encourage local labor participation by safeguarding more pension benefits.
  - Convert temporary public employees meeting specific requirements into permanent positions and abolish temporary positions (expected to reduce personnel expenses in the long term despite budget rise in FY2022/23).
  - Launch excise taxes on goods harmful to environment and health to secure more fiscal resources.
  - Corporatization of government services (including electricity) and improved management of government linked companies to support private sector development.
  - Progress in digitalization of public finance management: launching the One Common Portal and expanding One Common Billing System services.

### Medium-term fiscal balances under different scenarios (Fiscal year basis, percent of GDP)
- Fiscal balance under:
  - Baseline scenario:
    - 2022/23: 1.0
    - 2023/24: -1.6
    - 2024/25: -2.5
    - 2025/26: -2.9
    - 2026/27: -3.4
    - 2027/28: -3.1
    - cumulative 2022/23-2027/28: -12.5
  - Policy adjustments 1/:
    - 2022/23: 1.0
    - 2023/24: -0.9
    - 2024/25: -1.6
    - 2025/26: -1.8
    - 2026/27: -2.1
    - 2027/28: -1.6
    - cumulative 2022/23-2027/28: -7.0
- Footnote on policy adjustments:
  - Policy adjustments relative to the baseline: wage containment (0.2 percent of GDP), revenue mobilization (0.1 percent of GDP), and fuel subsidy reform (1.2 percent of GDP) gradually from 2023/24 to 2027/28.
- Table source: IMF Staff calculations.

### Monetary policy, exchange arrangement, and financial stability
- Currency-Interchangeability Agreement with Singapore:
  - Promotes monetary and financial stability; currencies accepted and exchanged at par and without charge.
  - Contributes to macroeconomic stability, low inflation, and allows Brunei institutions to benefit from Singapore’s deep financial markets (excess liquidity largely re-invested in Singapore dollar assets).
  - Peg helps attract FDI and bolster diversification efforts.
- Monetary policy and BDCB actions:
  - BDCB set up overnight standing facilities in 2018.
  - BDCB lowered its overnight liquidity provision rate three times from 1.75 to 1 percent after the pandemic.
  - Allowed temporary flexibility on loan/financing classification for targeted facilities and waived fees/charges for online local interbank transfers; regulatory notices set to expire by end-June 2022.
  - Standing facilities rates have appropriately increased recently in response to higher inflation outlook and Monetary Authority of Singapore tightening.
- Banking sector soundness and statistics:
  - NPL ratio: dropped after a slight uptick at end-2020 and stays low.
  - Capital adequacy ratio: around 20 percent, well above the statuary requirement of 10 percent.
  - Banking sector balance sheets expanded by 5.8 percent y/y in 2021; growth of bank assets largely placed in offshore investments.
  - Bank credit grew 4.6 percent in 2021, with corporate loans leading the growth.
  - Bank liquidity ratios remain high but declined from close to 140 percent of short-term liabilities a decade ago to 80 percent at end-2021.
- Private sector credit and access:
  - Credit to the private sector: around 40 percent of GDP.
  - Private sector credit is low by regional standards and compared to other O&G intensive economies (GCC).
  - Corporate loans have increased by over 10 percent in 2021 and are now over 50 percent of private sector lending.
  - Staff recommendation: holistic approaches to support non-O&G private sector development, including strengthening credit provision to MSMEs.
- Financial sector development and AML/CFT:
  - BDCB added a licensing module to its Centralized Statistical System (CSS) to automate license applications and renewals.
  - BDCB issued a regulatory notice on Pillar 3—Public Disclosure Requirements to improve banking transparency.
  - Strengthening AML/CFT legal and regulatory framework: amendments to Anti-Terrorism Order and Anti-Terrorism (Terrorist Financing) Regulations expected to be completed in 2022; Counter Proliferation Financing Order being finalized.
  - BDCB issuing guidelines on E-KYC to facilitate non-face-to-face onboarding and due diligence.
  - Brunei’s Mutual Evaluation process by the Asia Pacific Group on Money Laundering (APG) has commenced; on-site visit postponed due to COVID-19.
- Authorities plan and views on financial measures:
  - Authorities concur with retiring COVID relief measures in the financial sector; currently only 2 percent of bank loans use repayment deferment.
  - Committed to safeguarding financial sector stability and plan to implement the liquidity standard of Basel III agreement in 2022.
  - Found recent Fund capacity development on macro stress testing useful and are determining data collection needs for the stress test model.
  - Noted pandemic shifted AML/CFT supervision toward offsite examinations; 27 supervisory letters issued in 2021 highlighting concerns and deficiencies from offsite reviews.
  - Support issuing BDCB I-bills to serve as collaterals for overnight lending facilities in addition to Brunei Government Sukuk; see overnight facilities and I-bills as useful for liquidity and short-end of the yield curve.

### Structural reforms, diversification, and MSME development
- Diversification status and potential:
  - Exports remain highly concentrated in the O&G sector despite emergence of refinery, petrochemical, fertilizer sectors and agricultural exports expansion.
  - Number of export products with high revealed comparative advantage (RCA) and alignment with latent comparative advantages lag GCC economies.
  - Staff analysis using a machine learning collaborative filtering algorithm identifies chemical products, machineries and food as promising sectors for diversification (see Annex IV).
  - Staff estimates: a significant diversification push could increase Brunei medium-term growth by over 1.5 percentage points, while reducing growth volatility by 0.5 percentage point.
- Human capital and infrastructure:
  - Investments in human capital and infrastructure are key for sustainable growth; Brunei’s growing and relatively young population provides a demographic basis for medium-term growth.
  - Developing a diversified industrial base and higher value-added service exports require relatively high human capital inputs.
- Business environment and FDI:
  - Improvements in business environment should be sustained to attract more foreign investments into non-O&G sectors.
  - Continued improvement in Brunei’s Global Competitiveness Index ranking is encouraging; further efforts to attract quality FDI are welcome.
- MSME development:
  - MoFE and Darussalam Enterprise (DARe) implemented initiatives including bootcamps that created 276 start-ups with 825 job opportunities.
  - Most MSMEs still in early development stage.
  - Recommended comprehensive policy packages to remove distortions: facilitate access to financial resources, simplify and lower entry costs, supply capable workforce, expand market access, promote innovation and digitalization, and improve government assistance systems (see Annex V).
  - Authorities digitalization of business registration and preparation of comprehensive MSME policy expected to expand MSMEs’ access to government assistance.
- Digitalization:
  - Authorities implementing Digital Economy Masterplan 2025, launching new Personal Data Protection Law for private organizations, and reducing communication costs.
  - Investing in digital infrastructure is needed given relatively high cost but low speed of data usage; building digital platforms (e.g., digital payment hub).
  - Policy support for firms’ digital transition: financial benefits, training programs, and nurturing tech-savvy workforce.
- Authorities’ views on diversification and MSMEs:
  - Authorities concur on need to retire COVID relief measures and on importance of export diversification and MSME development.
  - Noted progress: attracting large FDI in oil refinery sector, investments in agriculture and O&G downstream; expect government-linked companies to spearhead strategic sector investments.
  - Participation in regional integration (RCEP in force and Indo-Pacific Economic Framework) expected to provide new market access and investment opportunities.
  - Human capital programs include i-Ready apprenticeship and SkillsPlus; private-public collaborations to develop specialized talent pools (examples cited with HengYi, UBD, Politeknik Brunei, IBTE).

### Climate policy and green transition
- Brunei Darussalam National Climate Change Policy (BNCCP):
  - Launched in 2020 with 10 strategies; NDC target to reduce greenhouse gas emission by 20 percent relative to business as usual by 2030.
  - BNCCP to be implemented by 2035 with mid-term reviews and improvements.
  - Prompt implementation is a priority; mainstream climate-related projects into fiscal framework explicitly.
  - Significant progress made against the 10 strategies and most 2021 targets met.
  - Steps taken include introducing Standards and Labelling Order for energy efficiency, launching a pilot program for electric vehicles, and joining global efforts in 2021.
  - Discussion on institutional framework for carbon trading and carbon pricing and policies on Zero Routine Flaring and As Low As Reasonably Practicable to reduce industrial emissions will be made by end of 2022.
  - Expediting fuel subsidy reform would help mitigate climate change and relieve fiscal burden.
- Climate resilience and adaptation:
  - Despite increased natural disaster risks, Brunei assessed as “low adaptive capacity” compared to countries with similar income per capita due to lack of disaster preparedness, agricultural vulnerabilities, and low scores on governance and business environment.
  - Recommendation: develop National Adaptation Plan and invest in climate resilient projects to reduce disaster costs and aid recovery.
  - IMF PIMA Climate module recommended to identify improvements for low-carbon and climate-proof infrastructure.
  - Shift to a low carbon economy could offer green growth and job opportunities via green investment, renewable expansion (including solar photovoltaics), and climate resilient infrastructure.
  - Targeted transfers needed to compensate households, workers, and firms affected by higher energy prices.
- Solar capacity progress:
  - Solar power capacity expanded from 1.42MW in 2020 to 5.42MW in 2021.

### Data issues and capacity building
- Data compilation and dissemination:
  - Progress in data provision continues and is broadly adequate for surveillance.
  - BDCB publishing Business Sentiment Index since November 2021.
  - Staff supports continuous efforts to follow international data standards and best practices.
  - Need for more timely and higher-quality publication of national accounts, balance of payment, and labor force statistics.
- Capacity development engagements:
  - A Fund capacity development mission on external sector data compilation concluded in July 2020.
  - A mission on macro-stress testing took place in April 2022.
  - PIMA mission schedule under discussion.
- Authorities’ views on data:
  - Authorities agreed further progress in data compilation and dissemination is needed.
  - COVID-19 impacted release of statistics; authorities committed to focus on timeliness and strengthen collaborations with data source agencies.
  - Authorities welcomed macro-stress testing and PIMA missions and called for continuing IMF engagement for capacity building.

*Source: IMF staff calculations and chapter text.*

### 43.      After being significantly affected by the new COVID-19 waves and reduced activity in

### 1brnea2022002 - 43.      After being significantly affected by the new COVID-19 waves and reduced activity in

### Economic outlook and growth prospects
- Brunei economy is poised to recover in 2022 after being significantly affected by the new COVID-19 waves and reduced activity in the O&G sector.
- Growth drivers:
  - High energy prices.
  - Reopening of the economy.
  - Investments in downstream O&G sectors and agriculture leading to new export opportunities.
- Table projections (selected):
  - Real GDP (percentage change): -1.6 (2021), 1.3 (2022), 3.3 (2023), 3.2 (2024), 3.2 (2025), 2.5 (2026), 3.4 (2027).
  - Nominal GDP (millions of Brunei dollars): 18,822 (2021), 25,355 (2022), 24,699 (2023), 24,783 (2024), 25,060 (2025), 25,400 (2026), 26,092 (2027).
  - Nominal non-oil and gas GDP (millions of Brunei dollars): 9,790 (2021), 12,158 (2022), 12,977 (2023), 13,671 (2024), 14,301 (2025), 14,938 (2026), 15,589 (2027).
  - Oil production ('000 barrels/day): 106 (2021), 104 (2022), 103 (2023), 109 (2024), 114 (2025), 120 (2026), 124 (2027).
  - Average Brunei oil price (U.S. dollars per barrel): 72.7 (2021), 86.0 (2022), 83.6 (2023), 71.6 (2024), 68.3 (2025), 63.8 (2026), 62.2 (2027).
  - Consumer prices (period average, percentage change): 1.7 (2021), 2.5 (2022), 2.0 (2023), 1.5 (2024), 1.0 (2025), 1.0 (2026), 1.0 (2027).

### Fiscal stance, risks, and recommended reforms
- Near-term guidance:
  - Continue targeted fiscal support to the vulnerable until the recovery is solid.
  - Discontinue pandemic relief measures.
  - Restore fiscal buffers given recent high energy prices.
- Medium- to long-term strategy (staff advocates increased fiscal consolidation to the level of sustainable long-term expenditure). Possible measures include:
  - Preservation of growth-enhancing spending.
  - Reform of untargeted subsidy and social spending.
  - Reduction in the wage gap between the public and private sectors.
  - Mobilization of revenues from the non-O&G sector.
  - Active promotion of corporatization and PPP.
  - Improvement of GLCs’ performances.
  - Accelerated digitalization of fiscal activities to improve efficiency.
- Fiscal outcomes and indicators (selected):
  - Total revenue (percent of GDP): 23.2 (2021), 23.7 (2022), 21.6 (2023), 20.8 (2024), 20.3 (2025), 19.7 (2026), 19.6 (2027).
  - Oil and gas revenue (percent of GDP): 19.6 (2021), 20.2 (2022), 17.9 (2023), 17.0 (2024), 16.3 (2025), 15.6 (2026), 15.4 (2027).
  - Total expenditure (percent of GDP): 27.8 (2021), 22.7 (2022), 23.2 (2023), 23.3 (2024), 23.3 (2025), 23.1 (2026), 22.7 (2027).
  - Overall balance (percent of GDP): -4.6 (2021), 1.0 (2022), -1.6 (2023), -2.5 (2024), -2.9 (2025), -3.4 (2026), -3.1 (2027).
  - Non-oil and gas overall balance (percent of GDP): -42.4 (2021), -34.6 (2022), -32.9 (2023), -31.5 (2024), -30.2 (2025), -29.0 (2026), -27.8 (2027).

### External position and balance of payments
- Preliminary estimates for 2021 indicate the external position is substantially weaker than suggested by fundamentals and desirable policies.
- Policy advice:
  - Wage containment measures for the public sector and fiscal consolidation to help rebalance the external position.
- Balance of payments and reserves (selected):
  - Current Account Balance (millions of U.S. dollars): 644 (2021), 2,080 (2022), 1,747 (2023), 2,056 (2024), 2,314 (2025), 2,450 (2026), 2,635 (2027).
  - Current Account Balance (in percent of GDP): 4.6 (2021), 11.1 (2022), 10.2 (2023), 12.0 (2024), 13.3 (2025), 14.0 (2026), 14.6 (2027).
  - Gross Official Reserves (millions of U.S. dollars): 4,242 (2021), 4,952 (2022), 5,562 (2023), 5,674 (2024), 5,786 (2025), 5,898 (2026), 6,010 (2027).
  - Reserves in months of next year's imports of goods and services: 4.0 (2021), 5.1 (2022), 6.0 (2023), 6.2 (2024), 6.4 (2025), 6.5 (2026), 6.6 (2027).
  - Exports (millions of U.S. dollars): 7,908 (2021), 14,078 (2022), 11,285 (2023), 11,662 (2024), 12,011 (2025), 12,365 (2026), 12,846 (2027).
  - Of which oil and gas exports (millions of U.S. dollars): 4,446 (2021), 8,329 (2022), 4,512 (2023), 4,734 (2024), 4,916 (2025), 4,946 (2026), 5,036 (2027).
  - Imports (millions of U.S. dollars): 8,169 (2021), 11,615 (2022), 10,255 (2023), 9,839 (2024), 9,621 (2025), 9,498 (2026), 9,540 (2027).

### Diversification, private sector credit, and investment
- Continued efforts to diversify the economy are welcome and should continue.
  - Brunei is significantly less diversified compared to other large O&G exporters.
  - Expanding the export portfolio and aligning export structure with comparative advantages should support growth and sustainability.
  - Recent growth in downstream sectors, fertilizers, and food industries is encouraging.
  - Continued improvement in human capital development and digital infrastructure will facilitate expansion of diverse industries and private sector–led growth.
- Financial intermediation and domestic financing:
  - Credit to the private sector should be expanded alongside diversification initiatives.
  - Loan-to-deposit ratio of the banking sector is low while banks place significant amounts of liquidity overseas.
  - Increasing private sector credit will allow more domestic savings to be deployed to support domestic economic development.
  - Domestic financing options could be explored to fund investments in new industries, including financing new projects by government linked companies and foreign investors.
- Selected financial/credit indicators:
  - Private Sector Credit (percent change, y/y): -5.0 (2021), 3.5 (2022), 1.5 (2023), 1.5 (2024), 1.4 (2025), 1.3 (2026), 1.3 (2027).
  - Broad money (M2, percent change, y/y): 3.7 (2021), 3.2 (2022), 2.8 (2023), 1.8 (2024), 1.8 (2025), 1.7 (2026), 1.7 (2027).

### Financial sector stability and supervision
- Efforts to strengthen financial sector supervision and stability should continue.
- Authorities’ commitments welcomed:
  - Implement the Basel III framework.
  - Improve stress testing.
- Banking sector indicators (selected):
  - NPL to total loans: 3.1 (2021).
  - Regulatory capital to risk-weighted assets: 20.2 (2021).
  - Banks’ profitability is stable but lower than the pre-COVID period; liquidity is ample though declining.

### Data, capacity development, and consultations
- Authorities have made efforts to improve data management.
- Continued commitment to improve data compilation and reporting is recommended.
- Closer cooperation in capacity development with the Fund is welcome.
- It is expected that the next Article IV consultation with Brunei Darussalam will be held on the standard 12-month cycle.

*Source: IMF staff report content as provided.*

### Appendix I. COVID-19 Pandemic Recent Developments

### Appendix I. COVID-19 Pandemic Recent Developments

### Pandemic timeline and epidemiological developments
- First cases detected in March 2020; early and decisive interventions contained the first wave in 2020.
- Brunei was hit hard by Delta and Omicron variants in late 2021–2022:
  - Case numbers rose in August 2021, subsided by December 2021, re-surged in February 2022, and slowed since March 2022.
  - Daily new cases dropped to around 1878 per million people by end of June 2022.
  - Fatality rate declined to 0.14 percent by end of June 2022.

### Vaccination progress
- Vaccination efforts began in April 2021.
- Coverage as of end of June 2022:
  - About 97 percent of the population are fully vaccinated.
  - About 68 percent of the population has received a booster.

### Containment and public-health measures
- Early actions taken (post-March 2020):
  - Daily press conference to update the public.
  - Border control and travel bans imposed.
  - National Steering Committee established to oversee containment measures.
  - National Isolation Center bed capacity increased rapidly.
  - Enhanced testing and contact tracing for early detection and treatment.
- Digital and information measures:
  - Official mobile application (Telegram for GOV.BN) and Health Advice Line launched.
  - Self-Assessment Tool via healthinfor.gov.bn and BruHealth application rolled out for contact tracing and vaccination appointment booking.
- Social distancing and restrictions:
  - Containment measures gradually lifted since Q3 2020 as cases stabilized.
  - In response to August 2021 surge:
    - Closure of several public facilities and suspension of on-site school activities.
    - Food establishments limited to takeaway and delivery.
    - Public gathering cap reduced to 30 people.
  - Restrictions began to be gradually lifted since December 2021.
  - Government declared Brunei would move to the endemic phase according to the National COVID-19 Recovery Framework, starting on December 15, 2022.

### Economic relief and labor-market support
- COVID-19 containment measures package:
  - Amount: BND182 million (about 0.9 percent of GDP).
  - Measures effective April 1, 2020 (and later extended to end-2021).
- Key business and financial support measures:
  - Deferment on payments of Employee Trust Fund (TAP) of 5 percent, and Supplemental Contributory Pensions (SCP) contributions of 3.5 percent for local employees earning less than $1,500 per month in all sectors under MSMEs with less than 100 employees.
  - Government provides full SCP contributions to the registered self-employed.
  - Deferment on principal repayments on business and personal financing/loans for affected sectors; loan restructuring with a period of not exceeding 10 years.
  - Deferment on principal repayments on personal financing/loans related to land.
  - Waiver of trade and payment transaction fees for companies in tourism, restaurants, air transport, food and medicine sectors.
  - Conversion of outstanding credit-card balances into a term loan for a period not exceeding three years for affected individuals in the private sector (including the self-employed).
  - Waiver of all charges and bank payments for interbank transfers (except third party charges)—only applicable to local banks.
  - Temporary suspension of rental charges for markets and stores operating under the Ministry of Home Affairs.
  - Temporary exemption of customs and excise duties to assist retailers and consumers from rising demand for hygiene and disinfectant products.
  - Providing 25 percent salary subsidies for Brunei employees in the MSME sector with less than 100 employees.
  - Discounts on rental rates of government buildings for MSMEs in Targeted Sectors (tourism, hospitality, restaurants/café, air/water transportation).
  - Providing 50 percent tax discount on corporate income tax for the year of assessment 2021 in Targeted Sectors.
  - Providing Co-Matching Grants for e-commerce (e-Kadai) and logistic services.
- Consumer and service continuity measures:
  - Monitoring of essential product prices (rice, sugar, sanitizers, surgical masks).
  - Enhancing telecommunication services (e.g., postal services between Malaysia and Brunei).
  - Alternative service delivery platforms (e.g., drive-thru pension service payments).
- Support for front-liners and volunteers:
  - Special monthly allowance of BND400 to front-liners until the eradication of COVID-19 in Brunei.
  - COVID-19 Relief Fund established for public contributions.
  - Establishment of Youth Volunteer Ad-Hoc Committee.
- Supporting the labor market and skills formation:
  - Providing free online training through Coursera and expanding Darussalam Enterprise’s fully sponsored Industry Business Academy online training.
  - Expanding the i-Ready Apprenticeship Program to graduates with Level 5 diploma level (BDQF Level 5 Diploma (HND or Advanced) or equivalent) and TVET qualifications for an apprenticeship period of 18 months.
  - Revamping the JobCentre Brunei (JCB) portal to improve talent sourcing and job matching.
  - Providing 25 percent payroll subsidy to local workers in MSMEs with 100 employees and below for a pre-determined period of time.

### Social, travel, and education measures
- Travel and mobility:
  - Travel ban out of Brunei for all citizens and permanent residents; foreign nationals/visitors barred from entering Brunei.
  - Facilitated cross-border movements of transport operators and business owners to maintain economic needs with safeguards.
  - Reciprocal travel arrangements such as the Reciprocal Green Lane (RGL) with Singapore.
  - Temporary closure of all public places (worship halls, cinemas, food premises, sport complex, museums, library).
- Online and remote learning:
  - Provision of online learning platforms for teachers and students, including televised education programs at home.
  - Encouraging public donations of computers, laptops, and tablets.

*Source: Appendix I. COVID-19 Pandemic Recent Developments (1brnea2022002).*

### Appendix IV. An Export Diversification Analysis for Brunei

### Appendix IV. An Export Diversification Analysis for Brunei

### Overview and key takeaway
- Exports in Brunei remain highly concentrated in the O&G sector, despite progress.
- A machine-learning based export recommendation algorithm identifies chemical products, machineries and food as promising sectors with diversification potential for Brunei.
- Facilitating the development of these recommended sectors could advance diversification, foster growth and enhance macroeconomic stability.

### Role of export diversification
- Export diversification is positively associated with economic growth and macroeconomic stability (cited literature: Imbs and Wacziarg, 2003; Klinger and Lederman 2004 and 2011; Cadot et al., 2011).
- An export structure aligned with latent comparative advantages is associated with stronger and more stable growth.
- Che & Zhang (2022) use a machine learning algorithm—product-based collaborative filtering—to construct recommended export product lists; countries more aligned with recommendations achieve higher growth and lower growth volatility.

### Current export structure and RCA findings
- O&G exports constitute over 80 percent of total exports, down from over 90 percent a decade earlier.
- Number of high-RCA export products in Brunei was 10 in 2018.
- The number of high-RCA exports is smaller than predicted by Brunei’s population size and GDP per capita (Figure 1 finding).

### Trends versus peers
- Brunei’s number of high-RCA export products has declined since the early 2000s, while UAE, Saudi Arabia and Bahrain have increased theirs.
- Commodity-exporting countries tend to have more concentrated export portfolios; Brunei has made less progress in diversification relative to some GCC peers.
- In many GCC economies the similarity score (alignment between actual and recommended export structure) has remained stable or improved since the 1990s (Bahrain, Oman, Saudi Arabia, UAE), driven by diversification away from O&G (example: Saudi Arabia reduced O&G share from 83 percent in 1995 to 67 percent in 2018; chemical and related products increased from 6 percent to 16 percent).

### Alignment with latent comparative advantages
- Using the collaborative filtering algorithm and SITC 1-digit aggregation, Brunei’s similarity score improved during the 1990s and 2000s, but has been declining since 2010.
- A higher similarity score indicates greater alignment between realized exports and latent comparative advantages.

### Algorithm-generated recommendations (SITC 4-digit → grouped to SITC 1-digit)
- The algorithm produced a recommended list of 55 export products for Brunei with the highest recommendation coefficients at the SITC 4-digit level.
- Sectoral grouping of recommendations (SITC 1-digit level) shows concentration in:
  - Food & live animals
  - Chemicals & related products
  - Machinery & transport equipment
- Comparison (Figure 4): recommended distribution vs actual distribution of Brunei’s high-RCA exports (2018) shows recommended emphasis on Food, Chemicals, Machinery while actual remains dominated by Mineral fuels & related.

### Top algorithm-recommended products (ranking, product code, actual RCA)
- 1: Non-Gold Coin — 9610 — 84.16
- 2: Liquified Petroleum Gases — 3413 — 43.41
- 3: Miscellaneous Machinery — 7239 — 0.68
- 4: Acyclic Alcohols — 5121 — 13.59
- 5: Miscellaneous Articles of Glass — 6658 — 0.04
- 6: Miscellaneous Combustion Engines — 7138 — 0.00
- 7: Sugar Syrups — 0619 — 0.01
- 8: Electronic Microcircuits — 7764 — 0.00
- 9: Miscellaneous Electronic Circuit Parts — 7768 — 0.00
- 10: Fruit Preserved by Sugar — 0582 — 0.00
- 12: Internal Combustion Engines for Aircraft — 7131 — 9.47
- 19: Crude Petroleum — 3330 — 6.51
- 29: Nitrogenous Fertilizers — 5621 — 0.00
- 38: Frozen Fish — 0342 — 0.20
- 41: Aircraft Tires — 6253 — 2.61
- 43: Trucks and Vans — 7821 — 0.00
- 55: Miscellaneous Food-Processing Machinery — 7272 — 0.00
- (Full list comprises 55 SITC 4-digit recommendations with corresponding recommendation ranking and actual RCA scores.)

### Policy lessons and recommendations
- Identifying policies to facilitate organic emergence of recommended non-O&G export sectors is important for diversification.
- Policy actions illustrated by UAE experience:
  - Promote resource-based downstream manufacturing (refineries, fertilizer plants, aluminum smelters).
  - Establish industrial development departments and specialized industrial zones for different industries.
  - Exempt manufacturing companies from customs duties on machinery, equipment, spare parts and raw materials; exempt from export duties and taxes.
  - Simplify procedures to attract foreign talent and investment; standardize and modify investment procedures; simplify approvals for industrial licenses and mergers.
- Investing in human capital and digital infrastructure is key to developing a more modern and sustainable export structure.
- Several GCC countries target knowledge-based industries, including knowledge-intensive manufacturing and high value-added services; diversification in this direction requires high-quality human capital and robust infrastructure. Brunei has room to improve on both fronts.

### Potential macroeconomic gains from improved alignment
- Che & Zhang (2022) cross-country estimation implication: if Brunei’s similarity score improved to the level of United Arab Emirates,
  - annual GDP per capita growth could increase by 1.6 percentage points annually;
  - the 5-year standard deviation of annual growth could decline by 0.5 percentage point.

### Methodology: collaborative filtering (product-based KNN) — concise summary
- Products are represented as vectors of RCA scores across m countries.
- Cosine similarity is used to measure similarity between products.
- For country i:
  - Select the high-RCA product set where r_ij > 1.
  - For each product j, predict r_ij as the weighted average RCA of the high-RCA set, weighted by cosine similarity between product j and products in the high-RCA set.
  - Recommend the N products with the highest predicted r_ij values.
- Similarity score between recommended and actual export portfolios:
  - Actual export structure: share of high-RCA exports (SITC 4-digit) belonging to each SITC 1-digit sector.
  - Recommended export structure: share of recommended products belonging to each SITC 1-digit sector.
  - Similarity score is calculated as the distance between these two vectors.

*Source: Appendix IV. An Export Diversification Analysis for Brunei (IMF).*

### 2. To address the declining performance, the authorities have introduced several policies

### 1brnea2022002 - 2. To address the declining performance, the authorities have introduced several policies

### Context and rationale
- The Economic Blueprint emphasizes re-invigorating MSMEs to foster entrepreneurship, facilitate export orientation and seize larger benefits from FDI and Government-Linked Company (GLC) participation.
- MSMEs in Brunei are classified by number of people engaged:
  - micro enterprise: under four people
  - small enterprise: 5–19 people
  - medium-sized enterprise: 20–99 people
- MSMEs in Brunei are much smaller than large companies: operating revenues of micro, small and medium-size enterprises are only 0.4, 0.9, 4.7 percent of that of large company respectively.
- Pre-pandemic disadvantages for MSMEs included limited access to financial credit, shortage of capable entrepreneurs and workers, limited sales markets, and lagging innovation and digitalization.
- The Ministry of Finance and Economy (MoFE), mainly through Darussalam Enterprise (DARe), has promoted initiatives to enhance financing, capacity building, facilities, market access and digitalization. Details are reported in the Handbook 2019−Youth Entrepreneurship Ecosystem for bolstering MSMEs’ access to assistance programs.

### Policy priorities and recommended measures
- Overarching recommendation:
  - Prepare a comprehensive national MSME strategy and implement policies in a “whole of government approach” to address bottlenecks, diversify the economy, boost productivity and foster sustainable and inclusive growth.

- Facilitate access to finance
  - Scale up SME bank credit and DARe funding to meet unmet MSME demand.
  - Improve institutional factors: good governance, financial supervisory capacity, and better credit information availability in the banking sector.
  - Expand DARe’s capacity building program to help entrepreneurs build bankable businesses.
  - Develop financial markets: create a national stock exchange, credit guarantee schemes and factoring companies to supply operational funds and increase capital for viable MSMEs.
  - Promote safe access to Fintech, strengthen competition among credit providers and expand credit information.
  - Supporting facts and figures:
    - Bank Usahawan (SME bank) was established in 2017; its loan was only 0.15 percent of total loan in the banking sector in 2019.
    - According to BDCB internal research (Asia Small and Medium-Sized Enterprise Monitor 2020, ADB): 6 percent of total loans and 14 percent of total business lending belong to MSME credit (no aggregate MSME credit data reported in bank credit statistics).

- Improve human capital and labor attraction
  - Continue sizeable investment in education (13.5 percent of total expenditure in FY2021/22) and active labor market policies (ALMPs) such as the I-Ready Apprenticeship.
  - Address labor shortages due to small population, wide wage gap between larger companies and MSMEs, and higher perceived job risk in MSMEs.
  - Consider financial incentives targeted at MSME workers—example: a deposit account with preferential interest in SME bank—to attract young and competent workers to MSMEs.
  - Implement targeted and well-designed ALMPs and foster education and training of entrepreneurs to create more companies.
  - Program detail: I-Ready Apprenticeship provides a monthly allowance to participating graduates for 18 months.
  - Payment per employee relative to large companies: 30.7 percent in micro enterprises, 38.1 percent in small enterprises and 47.4 percent in medium-size enterprises.

- Expand pathways to domestic and global markets
  - Promote cooperative efforts among large firms, GLCs and MSMEs, including active participation of MSMEs in downstream complexes created by FDI.
  - Ensure a level playing field and reduce dominance of the public sector to create more opportunities.
  - Enhance MSME participation in public projects and procurement, including preferential treatment for innovative products and services from MSMEs.
  - Strengthen international access: establish an Export Credit Agency, support acquisition of standards and certifications, and expand utilization of FTAs.
  - Promote business linkages and trade facilitation to increase MSME exposure to overseas markets.

- Boost productivity and competitiveness through innovation and digitalization
  - Encourage MSMEs to expand into innovative and digitalized industries: professional services, information and computer technology, and e-business.
  - Provide financial support and tax benefits for capital investment, especially on intangibles.
  - Foster cooperation with universities and research institutes to strengthen MSME innovative capability.
  - Build reliable and efficient digital infrastructure such as broadband.
  - Productivity evidence:
    - A ten percent rise in intangible capital investment increases labor productivity by 4.5 percent, while a ten percent rise in tangible capital increases productivity by 3.5 percent (IMF, 2021).

- Upgrade government assistance: strategic coordination and customization
  - Address fragmentation and lack of a dedicated national MSME coordination scheme.
  - Establish a national MSME strategy with robust legal, regulatory and taxation frameworks to create an MSME-friendly environment.
  - Strengthen collaboration with the private sector (National Chamber of Commerce and Industry, Young Entrepreneur Association Brunei).
  - Establish an inter-ministerial body for MSMEs and strengthen MSME-related governmental agencies to improve coordination.
  - Comparative example: Korea heightened an MSME agency to ministry level in 2017; venture enterprises increased from 33,289 in 2016 to 39,101 in 2020.

### Main assistance programs (summary of Table 1)
- Financing
  - Bank Usahawan: supplies exclusive loan for MSMEs. (Agency: MoFE)
  - Co-Matching Scheme: provides co-matching funding (70 percent from DARe, 30 percent from MSME). (Agency: DARe)
  - Entrepreneurship Financial Assistance Program: provides micro grants for eligible youths and vulnerable groups. (Agency: MCYS)

- Capacity building
  - Bootcamp: training to start and scale up business. (DARe)
  - Energy Business Academy: develops venture business in the oil & gas industry through training and coaching by experts. (BSP)
  - Elevate: grows business with a five-year strategic roadmap and periodic monitoring. (DARe)
  - Industry Business Academy: knowledge to start, grow and export. (DARe)
  - Digital Upskilling Program for ICT Workforce: subsidized ICT training for local workforce including MSMEs. (AITI)
  - Youth Development Center Lights on: equips young entrepreneurs with skills and practical experience. (MCYS)

- Facilities
  - i-Centre: technology-based incubation center with co-working space. (DARe)
  - K-Hub: platform for creative and multimedia industry. (DARe)
  - Ready Built Factories: offers affordable working space for business expansion. (DARe)

- Market access
  - Inbound Market Access: business matching and networking with overseas companies. (DARe)
  - Outbound Market Access: participation in overseas expos, trade fairs and workshops. (DARe)
  - Export Market Facilitation: helps agricultural and aquaculture businesses meet importing country requirements. (MPRT)
  - Standards Consultancy: training and consultancy to adopt international standards. (DARe)

- Digitalization
  - eKadaiBrunei: online directory portal linking to e-commerce platforms and logistics providers. (AITI)
  - DARe Links: B2B platform facilitating business linkages between clients and local businesses. (DARe)
  - Joint Funding for Digital Adoption: assists MSMEs in adopting digital technology with funding up to 70 percent of the cost of digital solutions. (AITI)

*Prepared by Sangmok Lee. (Content as presented in the source document.)*

### Appendix VI. Status of Staff Advice in 2021 Article IV Consultation

### Appendix VI. Status of Staff Advice in 2021 Article IV Consultation

### Staff Advice — Policy Actions: Fiscal Policy
- Near-term: Continue fiscal support.
- Longer-term: Resume consolidation by preserving growth-enhancing spending, reforming subsidies, containing public wages, and broadening tax base, while improving public finance management.
- Authorities' actions in FY2021/22:
  - Expanded expenditure for containing COVID-19 and relieving vulnerable households and firms.
  - Implemented measures including:
    - (i) implementing the Fiscal Consolidation Program;
    - (ii) reducing subsidies by sales of subsidy-free fuel and smart metering on electricity and water;
    - (iii) launching new scheme of pensions;
    - (iv) abolishing temporary positions in the government;
    - (v) planning excise taxes on goods harmful to the environment and health;
    - (vi) adopting new financial regulation;
    - (vii) promoting the Public Investment Management Assessment.
  - Noted shortcoming: room to improve in capital expenditure in the preparation process of new national develop plan.

### Staff Advice — Policy Actions: Financial Sector Policies
- Objective: Further develop the financial sector while strengthening regulatory, supervision and macroprudential framework to safeguard financial stability.
- Actions and progress:
  - Implemented International Financial Reporting Standard 9 by financial institutions.
  - Taken steps to put all the three pillars of Basel II in place.
  - Development of a holistic macroprudential framework remains in progress, including a preliminary assessment of the countercyclical capital buffer.
  - A Domestic Systemically Important Banks framework has been put in place.
  - TA on banks macro stress testing mission planned in April.
  - Plans to establish a secondary bond market and stock exchange remain work-in-progress.
- AML/CFT:
  - Continued to strengthen the AML/CFT legal and regulatory framework.
  - Amendments to the Anti-Terrorism Order and Anti-Terrorism (Terrorist Financing) Regulations expected to be completed in 2022.
  - Counter Proliferation Financing Order is being finalized.
  - BDCB is issuing guidelines on E-KYC to facilitate non-face-to-face customer onboarding and due diligence.
  - Brunei’s Mutual Evaluation process by the Asia Pacific Group on Money Laundering (APG) has commenced, pending rescheduling of the on-site visit postponed due to COVID-19.

### Staff Advice — Policy Actions: Structural Policies
- Objective: Diversify the economy and develop the private sector by FDI attraction, business environment improvement, human capital enhancement, and active labor market policies, while accelerating digitalization and climate change responses.
- Developments:
  - Fast-growing downstream industry, including Brunei Fertilizer Industries’ commencement of production in January 2022, has deepened economic diversification.
  - Quality FDI attraction and better business climate pursued under cooperation among the FDI Action and Support Center, the Brunei Economic Council Board and the Darussalam Enterprise.
  - Job matching and training fostered through the JobCentre Brunei and the Manpower Planning and Employment Council.
  - Measures to protect jobs and provide support for individuals enacted during the pandemic.
  - Promotion of digitalization and climate change responses through:
    - Digital Economy Masterplan 2025;
    - Brunei Darussalam National Climate Change Policy.

### Staff Advice — Policy Actions: Data Issues
- Recommendation: Improve data compilation and reporting.
- Authorities’ actions:
  - Committed to publishing the National Summary Data Page (NSDP) continuously.
  - The Brunei Darussalam Central Bank has started to release the Business Sentiment Index in November 2021.

### Fund Relations (As of June 30, 2022)
- Membership Status: Joined October 10, 1995; Article VIII.
- General Resources Account:
  - Quota 301.30 SDR Millions 100.00 Percent of Quota
  - Fund holdings of currency (exchange rate) 266.31 SDR Millions 88.39 Percent of Quota
  - Reserve position in Fund 35.20 SDR Millions 11.68 Percent of Quota
- SDR Department:
  - Net cumulative allocation 492.29 SDR Millions 100.00 Percent of Allocation
  - Holdings 506.41 SDR Millions 102.87 Percent of Allocation
- Outstanding Purchases and Loans: None
- Latest Financial Arrangements: None
- Projected Obligations to Fund: None
- Implementation of HIPC Initiative: Not applicable
- Safeguards Assessments: Not applicable
- Exchange Arrangements:
  - Brunei Darussalam’s exchange rate arrangement is a currency board arrangement, with the Brunei dollar exchanged at par with the Singapore dollar.
  - Brunei has accepted the obligations under Article VIII, Sections 2(a), 3 and 4.
- Article IV Consultation:
  - Brunei is on the 12-month consultation cycle.
  - The Executive Board concluded the 2021 Article IV consultation on September 1, 2021.
- FSAP Participation: Not applicable

### Technical Assistance (selected items listed)
- FAD: A Medium-Term Strategy for Fiscal Sustainability (June 1998); Public Financial Management (December 2006, June 2011, April 2014); Fuel Subsidy Reform (April 2016).
- MFD/MCM: Developing the Financial System of Brunei Darussalam (December 1997); Establishment of Brunei Darussalam Monetary Authority (January 2006, December 2006, August 2008).
- MCM: Payment and Settlement Systems/Liquid Payment and Settlement Systems (May 2012); Liquidity Monitoring (January 2015); Monetary and Financial Statistical (March 2015); Scoping mission on the systemic risk monitoring and macroprudential policy frameworks (April 2018); Framework for bank resolution and crisis management (April 2018); Review of Macro Stress Testing (April 2022).
- STA: Monetary and Financial Statistics (October 1998, January 2006, July-August 2008, October 2009, July 2010, November 2011); Balance of Payments Statistics (May 1996, June-July 2003, June 2004); Government Finance Statistics (October 2011, May 2017); Enhanced General Data Dissemination System (June 2019); External Sector Statistics (July 2020).

### Statistical Issues — Assessment of Data Adequacy for Surveillance
- General:
  - Data provision continues to improve and is broadly adequate for surveillance, with some shortcomings due to timeliness issues.
  - Introduction of an Advance Release Calendar (ARC) in 2015 by the Department of Statistics (DOS) shortened dissemination delays.
  - DOS working to provide data through links such as www.data.gov.bn/.
  - National Statistics Committee working to strengthen data collection and compilation processes across relevant agencies.
  - Recommendation: Use the IMF’s Data Quality Assessment Framework for all national statistics.
- National accounts:
  - Quarterly GDP is available with a one-period lag.
  - In 2015, GDP estimates were rebased to 2010.
  - Source data incorporated: 2010/11 Household Expenditure Survey, 2011 Population and Housing Census, 2011 Economic Census — these need updating.
  - Recommendation: Rebase GDP from 2010 base year to a more recent year.
  - Government sector coverage extended to include statutory bodies; GDP by Income Approach and Gross National Income and Savings are released.
- Price statistics:
  - Monthly CPI available with a one-period lag.
  - CPI weights derived using the 2015/16 Household Expenditure Survey; recommended to update weights.
  - Compilation of producer and construction material price indices planned.
  - Feasibility of compiling import and export price indices is being assessed.
- Labor statistics:
  - DEPS conducts annual Labor Force Survey since 2014 with ILO technical assistance.
  - An inter-censal update was conducted in 2016.
  - Data on wages are limited; scope to enhance data quality.
- Sales statistics:
  - Quarterly retail sales index, and food and beverage index available with a one-period lag.
  - Compilation based on the Quarterly Survey of Business with weights from the 2017 Annual Census of Enterprises.
- Government finance statistics:
  - Shortcomings in classification of some flows and consolidation of major government institutional units.
  - Deficiencies include recording taxes net of subsidies and omission of key fiscal flows (e.g., property income on assets, unrecorded subsidy schemes, some capital transfers to extra-budgetary institutions).
  - Treasury’s priority: ensure GFS cash flow statement for the budgetary central government is updated quarterly.
  - Coverage could be expanded to general government by consolidating financial accounts for budgetary central government, extra-budgetary units, and social security funds.
  - Government finance statistics are not reported for publication in either the Government Finance Statistics Yearbook or the International Financial Statistics.
  - Authorities committed to improving GFS capacity, including participating in IMF training courses on GFS.
- Monetary statistics:
  - BDCB compiles and reports monthly monetary data (central bank, ODCs, OFCs) using SRFs.
  - Data are comprehensive and reported regularly and timely.
  - BDCB working to further improve data compilation and reduce dissemination lags.
  - Brunei reports data on some Financial Access Survey (FAS) indicators, including commercial bank branches per 100,000 adults and ATMs per 100,000 adults.
- Financial sector surveillance:
  - BDCB reports quarterly financial soundness indicators (FSIs) to the Fund.
  - Reported FSIs comprise all the core (12) and 10 encouraged FSIs for deposit takers.
- External sector statistics:
  - Quarterly balance of payments statistics reported to STA in BPM6 format since end-2015.
  - Main compilation challenges:
    - Reported data lack recommended granularity, hindering cross-checks and validations.
    - A few standard presentation items contain a very large number of embedded transactions, making compilation prone to imprecisions.
  - Compilation of international investment position on BPM6 basis has finished but has not been released.
  - In 2021, the Ministry of Finance and Economy reported data to the Coordinated Direct Investment Survey for the first time, covering inward direct investment for 2016-2020.

### Data Standards and Quality
- Participant in the Enhanced General Data Dissemination System (e-GDDS).
- National Summary Data Page launched in August 2019.

### Table of Common Indicators Required for Surveillance (As of July 5, 2022) — Selected entries
- Exchange rates: Date of Latest Observation 06/2022; Date Received 07/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- International reserve assets and reserve liabilities of the Monetary Authorities1: Date of Latest Observation 03/2022; Date Received 05/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Reserve/base money: Date of Latest Observation 03/2022; Date Received 06/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Broad money: Date of Latest Observation 04/2022; Date Received 06/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Central bank balance sheet: Date of Latest Observation 03/2022; Date Received 05/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Consolidated balance sheet of the banking system: Date of Latest Observation 03/2022; Date Received 05/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Interest rates2: Date of Latest Observation 04/2022; Date Received 06/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Consumer price index: Date of Latest Observation 02/2022; Date Received 06/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Revenue, expenditure, balance and composition of financing3 – budgetary central government: Date of Latest Observation Q4/FY2021/22; Date Received 05/2022; Frequency of Data Q; Frequency of Reporting I; Frequency of Publication A.
- Stocks of central government and central government-guaranteed debt5: Date of Latest Observation Q4/FY2021/22; Date Received 05/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- External current account balance: Date of Latest Observation 2020Q4; Date Received 11/2021; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- Exports and imports of goods: Date of Latest Observation 01/2022; Date Received 05/2022; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- GDP/GNP: Date of Latest Observation Q4/2021; Date Received 05/2022; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- International investment position7: Date of Latest Observation 2018; Date Received 06/2019; Frequency of Data A; Frequency of Reporting I; Frequency of Publication NA.
- Notes and footnotes preserved as in source: 1, 2, 3, 4, 5, 6, 7, 8 clarifications retained in source.

*Prepared by Asia and Pacific Department; July 21, 2022 — BRUNEI DARUSSALAM STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1brnea2022002.pdf_