SINGAPORE - Some of Singapore's reserves are set aside for the future, but a portion of the earnings and returns generated are spent on the present generation, Temasek Holdings chief executive Ho Ching said in a Facebook note explaining how the Republic manages its reserves.
In the note posted on Monday morning, Ms Ho said that this is a way of ensuring fair sharing between generations and has helped Singapore maintain its position among the world's few triple-A credit rated countries
Up to half of the returns from investing past reserves may be used for current government spending under the Singapore Constitution, she said. The Constitution was amended in 1991 to require each successive government to live within its means, spending only what they have earned during their term of office, said Ms Ho.
Past reserves saved up by previous generations, and governments before the most recent general elections, are to be locked up with spending subject to the approval of the President.
Ms Ho likened the management of Singapore's reserves to a grandfather protecting savings and the interest earned for future generations.
His children then have to decide whether to also save all the interest they earn for future generations yet unborn, or to spend part of it on present needs each year.
The Monetary Authority of Singapore, GIC and Temasek Holdings are the three key financial institutions of Singapore. The returns from these three entities and other investments, such as interest from bonds, totalled $8.6 billion last year.
This helped to fund the $8 billion Pioneer Generation Package, Ms Ho said.
"It is very fitting that the returns from past savings and reserves are used this way to provide for our Pioneer Generation," she added.
"It also gives meaning to those of us working in these institutions, past and present as well as future."