Budget 2018 debate

Prudent to refrain from using more of Singapore's reserves: MPs

MR LIANG ENG HWA, (Holland-Bukit Timah GRC)

There is some scope for reviewing how much Singapore should tap its reserves, said some MPs, but the general consensus that emerged yesterday is that it should stick to the current formula.

Most said it was prudent to maintain the existing net investment returns (NIR) framework, which allows the Government to spend half of the long-term expected real returns from investing the reserves.

Nominated MP Randolph Tan, who supported the status quo, noted "growing criticism from a vocal minority about the growth in Singapore's reserves".

He said developed economies like Singapore could be more exposed to financial crises than less-developed economies, and cautioned that the reserves have to be protected through a disciplined approach so that Singapore has the means to weather economic crises.

During the 2008-2009 global financial crisis, the reserves funded $4 billion for the Resilience Package to help workers, he noted. "If those reserves had not been readily available, the consequences would have been unimaginable," he said.

Mr Liang Eng Hwa (Holland-Bukit Timah GRC), chairman of the Government Parliamentary Committee for Finance as well as Trade and Industry, said putting back half of the investment returns to the reserves pot will help to grow the principal amountand lead to larger NIR contributions in the future.

He said the current proportion establishes a "fair balance" between spending on the current generation and saving for future generations.

Warning against changing it, he said: "It is always tempting to go for the short-term painless solution. Our forefathers were resolute in not taking that easy path and so should we."

Workers' Party assistant secretary-general Pritam Singh (Aljunied GRC), though, said the Government should consider tweaks to the NIR framework to stave off "increasing regressive taxes like the GST (goods and services tax)".

These include making a slight increase to the 50 per cent spending cap, which can be done temporarily to fund non-recurrent investments in infrastructure, he suggested. When the infrastructural projects have been completed, the cap can be returned to its original level, and revenue earned from the project can be returned to the reserves.

Mr Singh, noting that the reserves are estimated to be in excess of $1 trillion, said: "How much of it do we need to protect the Singapore dollar from currency speculators is a valid question."

Mr Seah Kian Peng (Marine Parade GRC) said there is scope to review the NIR framework at some point, but stressed that the NIR contributions have already been "called into service to a very large extent" - as the biggest contributor to Singapore's revenues.

"It is only when we do not have enough to cater to (vulnerable groups who fall through the cracks) that I feel we should consider raising the percentage - not as a means of populist hot-air balloon for everyone who demands a specious equality with their neighbour," he said.

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A version of this article appeared in the print edition of The Straits Times on February 28, 2018, with the headline Prudent to refrain from using more of Singapore's reserves: MPs. Subscribe