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ID:
144823
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| Summary/Abstract |
This paper examines the conduct of fiscal policy in Brunei from 2003Q1 to 2014Q2, focusing on the cyclical patterns in government expenditure. The results from a structural vector autoregression model provide evidence that fiscal policy in Brunei is procyclical, which has an expansionary effect on output and thus exacerbates the business cycle. This behaviour is primarily driven by procyclical current expenditure while capital expenditure is largely acyclical. The government should exercise caution to avoid adding cyclical pressures to the economy already afflicted by volatile oil prices. A key policy recommendation would be to adopt clear fiscal rules and better integration of the reserve funds in the budgetary framework to delink government spending from volatile oil revenues.
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| 2 |
ID:
132576
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| Publication |
2014.
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| Summary/Abstract |
Electricity prices in Brunei are highly subsidized, placing a heavy fiscal burden on the government budget. Prior to 1 January 2012, the primary electricity tariff in the residential sector was based on a Declining Block Tariff structure, and non-poor households enjoyed a disproportionately large share of total electricity subsidies. The government has since implemented a new electricity tariff in the residential sector based on an Increasing Block Tariff. The main objective of this paper is to evaluate the welfare impact for households. It is estimated that about 80 per cent of households benefit from the new tariff, with poor households enjoying a larger percentage gain compared to the old tariff. However, total electricity subsidies remain roughly unchanged under the new tariff; in addition, non-poor households continue to enjoy a substantial proportion of the subsidies. There is still much to be done to tackle the high fiscal costs of subsidies and the problem of distribution distortion.
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| 3 |
ID:
184217
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| Summary/Abstract |
This paper reassesses the impact of the residential electricity tariff reform implemented in 2012 on the distributional equity and fiscal cost of electricity subsidies in Brunei. Using data from the latest Household Expenditure Survey (HES) conducted in 2015/16, the study estimates that the poorest 20 per cent of households receive 18 per cent of total electricity subsidies, which is considerably larger than the previously estimated share of 11 per cent based on the 2010/11 HES data. This, in part, reflects behavioural changes induced by the reform to an increasing block tariff (IBT), as wealthier households reduce their electricity usage due to higher per-unit costs at higher levels of consumption while poorer households increase their usage as the tariff cost is cheaper in the first consumption block. Concomitantly, the fiscal cost of electricity subsidies has declined by more than 20 per cent following the tariff change. Yet, simulations of alternative reform scenarios show that there are substantial welfare gains and cost savings from refining the IBT structure, using a volume-differentiated tariff, or providing targeted cash transfers. The overarching message is that improving the design of subsidy schemes or introducing targeted transfers can achieve distributional equity and fiscal objectives more efficiently than existing electricity subsidies.
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