Budget 2018

Singapore Budget 2018: Unexpected currency fluctuations led to surprise $9.61b surplus

A large part of the steep increase of the Budget surplus is due to the exceptional $4.6 billion contributions from statutory boards, mainly the Monetary Authority of Singapore.
A large part of the steep increase of the Budget surplus is due to the exceptional $4.6 billion contributions from statutory boards, mainly the Monetary Authority of Singapore.PHOTO: ST FILE

Much of the surprise $9.61 billion Budget surplus last year is due to currency fluctuations, Finance Minister Heng Swee Keat said.

Making up about 2.1 per cent of Singapore's gross domestic product, the sum is the highest in 30 years. It also surpassed the initial forecast of $1.91 billion by five times.

A large part of the steep increase is due to the exceptional $4.6 billion contributions from statutory boards, mainly the Monetary Authority of Singapore (MAS). This far exceeds the $300 million predicted a year ago.

Such numbers are not normal as the MAS has not been able to make a contribution in the previous six years, Mr Heng said yesterday.

"The MAS has to maintain the stability of the Singapore dollar. Currency fluctuations, in particular, have a very significant impact on its returns because the reserves are invested overseas in different currencies." And the change of the Singapore dollar relative to the various currencies will have a very significant impact on MAS returns.

The other big contributor to the surplus is the higher stamp duty collections of $2 billion following the recent pickup in the property market.

Mr Heng cautioned against expecting either to occur every year.

 

"These are unexpected factors, which also means it is not a structural surplus and can turn the other way round," he said.

Of the total surplus, $5 billion will be channelled to the rail infrastructure fund for the building of future rail lines while $2 billion will go towards subsidising ElderShield premiums and other forms of healthcare support for Singaporeans.

The remaining amount will be given to adult Singaporeans as a one-off SG Bonus of $100 to $300.

Explaining why most of the surplus is going to the rail fund, Mr Heng said the fund is necessary to fulfil longer-term infrastructure needs. "We're not touching the past reserves. But now that we have a surplus, it's like what our founding generation used to do. When they have a surplus, they put it into reserves. And then the reserves grew."

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A version of this article appeared in the print edition of The Straits Times on February 21, 2018, with the headline 'Unexpected currency fluctuations led to surprise surplus'. Print Edition | Subscribe