Myth about ‘wonderful money’ in reserves debunked
SINGAPORE — In an attempt to debunk the myth that the Government is squirrelling away budget surpluses into reserves instead of channelling them into social spending, Deputy Prime Minister Tharman Shanmugaratnam clarified that the current generation is already benefiting from the investment income derived from reserves and Singapore needs to adopt prudent budgeting to ensure that today’s generation does not overspend at the expense of the next generation.
Mr Tharman, who is also Finance Minister, had said at an earlier rally on Saturday that the Government has maxed out on the investment income from reserves. But with the Opposition parties throwing around the idea in that past week that there is “wonderful money available from reserves that can be used to expand our social spending”, Mr Tharman said he felt the need to address the issue squarely on the last night of campaigning.
“First, there is this idea that the Government is actually making a very large surplus and hiding it away in reserves, and why don’t we use this secret surplus and spend it instead on all the good things we want to spend.”
Referring to statistics from the International Monetary Fund (IMF) on the country’s surpluses, which is also supplied and published by the Government, he explained that the statistics include monies from the sale of land.
“Why do we not spend in Singapore the monies that we get from selling land and instead put it into reserves where I can earn an income? This is simply prudent long-term budgeting. It doesn’t mean we’re hiding the money reserves; it means we will draw continually on the reserves every year by using the income derived from reserves.”
This year, for example, the Government has S$9 billion of investment income, called the Net Investment Returns Contribution (NIRC), which can be used for social spending and infrastructure, among others. Of that amount, S$4 billion was from the accumulated surpluses put into the reserves from the sale of land over the years, said Mr Tharman.
“Had we spent it before, we would not have this S$9 billion now. So it’s not just about benefiting our great-great-great-great-grandchildren. Today’s generation, including today’s older generation, is benefiting from this prudent budgeting,” he said,
Mr Tharman also dispelled the notion that government surpluses from investments after paying interests to the Central Provident Fund (CPF) were being stored in the reserves.
“Firstly, the Government or the GIC, if it were simply managing CPF monies, it would not be investing long term and taking significant risks in order to earn high returns. If you’re only managing CPF monies, you have to be very careful because there’s a guaranteed principal and interest,” he said.
On what happens to the GIC returns, Mr Tharman explained that half of it goes back into the budget of spending as part of a fair system where it benefits not just today’s generation, but the current pioneers as well as the next generation.
“So, let’s not think that the government is squirrelling away savings in reserves and denying the people of benefits. We are already benefiting from it today, but we’re doing it in the way to make sure that future generations will get the same benefits,” he said. LAURA PHILOMIN
