Singapore Budget 2015: Government to add Temasek's contributions to revenue as spending grows

SINGAPORE - The Government will move to include Temasek Holdings as a contributor to its Net Investment Returns (NIR) later this year, as a measure to strengthen the Republic's fiscal position amid increased spending on social and infrastructure development.

Overall government spending is projected to reach about 19 per cent to 19.5 per cent of gross domestic product on average over the next five years, about 1 per cent of GDP higher than government revenues today, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said on Monday.

This new measure comes as the government is projecting a deficit of $6.7 billion - or 1.7 per cent of gross domestic product - for this year, to cater to the fiscal needs for ongoing transport infrastructure and talent developments as well as productivity initiatives.

"It is now timely that we have this further enhancement to include the expected returns of Temasek in the NIR framework," said Mr Tharman.

He added: "The move will bolster our fiscal resources at a time when we have to fund long term critical infrastructure and develop the human talent and capabilities to secure our future. It continues to ensure that we spend from our reserves in a sustainable manner, so as to benefit both current and future generations."

The NIR framework was implemented in 2009 to allow the government to spend up to 50 per cent of the expected long term real returns on its net assets managed by the Monetary Authority of Singapore (MAS) and GIC.

The inclusion of Temasek as a contributor to the framework was deferred due to lack of established methodologies for return projection then.

"We are now ready for ours spending rule to be based on the total expected returns of all three investment entities, including Temasek," Mr Tharman said.

"(The inclusion) would enable us to spend based on its total expected returns, including realised and unrealised capital gains, not just actual dividends paid by Temasek to the Government," he added.

A Constitutional Amendment Bill on this change is set to be presented to the parliament later this year.