ST article on accounting for Singapore’s reserves
The Straits Times published an article yesterday on what constitutes Singapore’s reserves:
The 1999 White Paper on protecting the reserves defines current reserves as ‘those reserves that are not past reserves’.
These reserves include:
- Budget surpluses accumulated from the start of a new term of office Budget surpluses are accumulated when the Government collects more in revenue than it spends in a fiscal year.A new term of office starts after a general election is held and the new government is sworn into office.
- Funds pledged by the previous government to be used in the current government term This usually happens when a change of government takes place in the middle of a fiscal year, for example, as a result of a general election being called.However, if these monies are subsequently not used, they will form part of past reserves.
- Part of the returns from investing past reserves The Constitution was amended last October to stipulate that the Government can draw upon up to 50per cent of net investment returns (NIR) for its current spending.The new NIR spending rules define returns as including capital gains or losses, unlike previously where only interest and dividend income were included.The NIR is assessed based on the long-term expected real returns – over a 20-year horizon – on past reserves managed by the Government of Singapore Investment Corporation (GIC) and the Monetary Authority of Singapore (MAS).Half of the interest and dividends earned by Temasek Holdings from investing past reserves also goes back to this pool.
- Sales of land parcels with leases under 10 years Takings from such make up ‘a very small amount’, Finance Minister Tharman Shanmugaratnam told Parliament this year.
So unlike what I heard from one of my friends, it’s not a simple accounting matter as the government dipping into its reserves if the fiscal revenue (from taxes and other sources) proves insufficient. There’s also a distinction as to whether unspent surplus revenue from the previous fiscal year counts as reserves or merely unspent revenue brought forward.