Freeze public sector hiring, wage hikes: IMF

Fitri Shahminan
BANDAR SERI BEGAWAN


BRUNEI needs to freeze wage increments and employment in government to generate fiscal savings and encourage private sector employment, the International Monetary Fund (IMF) said.

“Reducing current and small capital expenditure could encourage efficient spending,” the IMF said following a consultation with the Sultanate on May 4.

In a media release issued yesterday, the IMF said this will help Brunei preserve resources, ensure fiscal discipline and realign incentives in favour of private sector employment.

“A public sector wage and hiring freeze would generate fiscal savings and encourage private sector employment,” the IMF said in the statement.

The Washington-based institution also proposed that Brunei drop projects in the national development plan that require large capital but have not been implemented successfully.

This will limit the number of these projects from being carried over to the next plan.

The IMF recommended these reforms given that the Sultanate has to deal with lower oil prices and production shock.

“Oil production and economic performance are expected to remain lackluster over the next three to four years as the refurbishment of oil facilities continues and prices only partically recover,” the IMF said.

The IMF said Brunei’s fiscal and current account balances are expected to fall from “sizable surpluses” - which the country has enjoyed for over a decade owing to strong energy prices and prudent policies - to “large deficits”.

“Brunei’s sizable financial assets are more than adequate to absorb these negatives shocks and insulate the economy from their impact,” the IMF said.

The IMF said the shift in global energy market gives the country an opportunity to “revisit and reframe policy priorities”.

IMF suggested that the country’s savings should be used to finance near-term fiscal and external deficits.

A multi-year programme should also be implemented to improve efficiency in public spending, address and troubleshoot price and wage distortions as well as promote growth of industries outside of the oil and gas sector.

The IMF proposed for “further progress” in public financial management reforms.

IMF added the current decline in oil price represents the opportunity to consider making fuel subsidy reform.

“The authorities should take advantage of the smaller gap between the retail price and the world price to formulate and initiate the implementation of a long-term strategy for fuel subsidy reform, similar to regional peers,” it said.

The Ministry of Finance announced at the second sitting of the Legislative Council Meeting in March that with a proposed national budget of $6.4 billion, Brunei would run into a deficit of $2.28 billion for the fiscal year 2015/216.

Minister of Finance II Yang Berhormat Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim said weak oil prices will hurt total government revenue which is projected at $4.117 billion.

The government eventually only approved a budget of $5.7 billion and this should bring the actual deficit down to over $1.58 billion.


Sumber - The Brunei Times