SINGAPORE - The net investment returns (NIR) framework, which allows the Singapore Government to draw from investment entities' expected rather than actual returns, means contributions to the national coffers are less volatile unlike actual dividends from realised profits.

It also provides leeway for "leaning against the wind" - spending more during downturns and saving more in good times, Temasek Holdings chief executive Ho Ching said in a Facebook post on Tuesday (Sept 8).

Ms Ho, who has put up a series of posts about Singapore's reserves and budget, also said in her latest update that while the NIR approach offers advantages, estimates of expected returns must be used with caution since "it's not cash in the bank".

"The long-term expected return is an estimated number, which is dependent on various assumptions and scenarios. These include economic growth and inflation assumptions in the various major economies, which may or may not come true," said Ms Ho.

"There may also be temptation to fudge such estimates and overspend, especially if we do not take our role with absolute seriousness as stewards for past, present and future generations," she said.

She also pointed out another "special category"in the Singapore budget not usually found in the budgets of other governments - special transfers and top-ups.

This includes items such as multi-year funding for GST credits for the lower income families, and the Pioneer Generation package.

Setting aside these funds "ensures we do not create unfunded entitlement programmes and spend beyond our means", said Ms Ho.

"This also ensures that promises made by one particular government does not burden future governments, and more importantly not burden future generations of taxpayers, like what we often see around the world."