Govt used close to maximum allowed returns on reserves

Govt used close to maximum allowed returns on reserves
Marine Parade GRC MP Fatimah Lateef explaining the Pioneer Generation Package to participants at a dialogue last month.

SINGAPORE - The Government has used close to the maximum allowed investment returns on Singapore's reserves in its last five Budgets.

It spent on average just above 47 per cent of these returns for the 2009 to 2013 financial years.

This financial year, it will tap the maximum amount of 50 per cent of these returns, following the projected Budget deficit.

Keeping within these limits reflects a prudent approach to fiscal spending, said Finance Minister Tharman Shanmugaratnam in a written parliamentary reply yesterday.

He was responding to Non-Constituency MP Gerald Giam's question on what percentage of the returns had gone into the Budgets of the last five years.

For its Budgets, the Government is allowed to use up to half of the long-term expected returns from investing past reserves.

These are net assets managed by the sovereign wealth fund GIC, the Monetary Authority of Singapore and Temasek Holdings.

Mr Tharman, who is also Deputy Prime Minister, said the Government generally budgets to take in 50 per cent of these net returns at the start of each financial year, though the actual amount used may vary. This can be due to differences between the estimated net investment returns and the returns actually produced.

These investment returns will "remain an important source of revenue over the long term" because government spending will increase over time, he added.

"It is therefore vital that we spend in a disciplined way, and ensure sustained benefits from the returns on our reserves," he said.

"We should spend to achieve desired outcomes, rather than spend to the last dollar available."

This portion of the Budget has been about $7 billion to $8 billion annually, he said.

The 2014 Budget is expected to have a deficit of $1.2 billion.

That is after accounting for the $8 billion set aside for the Pioneer Generation Fund, which provides help for the health-care costs of 450,000 senior citizens aged 65 and over this year.

An estimated $8.1 billion will be taken from the net investment returns for this Budget, up from $7.9 billion the year before.

charyong@sph.com.sg

This article was published on April 15 in The Straits Times.

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