President briefed on Covid-19's impact in lead-up to Budget

Work to prepare for next year's government Budget has begun.

President Halimah Yacob was briefed on Monday by Finance Minister Lawrence Wong and other officials on the expected long-term real rates of return on Singapore's assets, with a focus on how Covid-19 and climate change will affect the investments.

This projection is important because it affects how much of the reserves the Government can include in its annual Budget for current needs. The Budget is traditionally presented in Parliament by the Finance Minister in mid-February, but planning and consultation begin several months earlier.

In a Facebook post on Monday, Madam Halimah said she had met Mr Wong and officials from the Ministry of Finance to discuss the Government's spending limit under the Net Investment Returns framework. Senior representatives from GIC, the Monetary Authority of Singapore (MAS) and Temasek were also present.

Under the framework, the Government is allowed to take into the Budget up to 50 per cent of the expected long-term real returns on net assets invested by GIC, MAS and Temasek, after deducting liabilities such as government bonds. The three entities manage Singapore's reserves.

Madam Halimah said greater attention was paid this year to the long-term effects of Covid-19 and climate change on the investments, and how these events would impact how the expected long-term real rates of return are derived. "I am satisfied that our agencies are looking closely into these issues," said the President, who holds the second key to past reserves in her custodial role.

As in previous such meetings, she also spoke to Mr Wong and the officials about the global economic outlook, and the methodologies and basis on which the projections were derived and certified by the respective boards of the three entities.

She has referred the proposal to the Council of Presidential Advisers for its advice, and said she would give the Government her response after the council has given its input. "With my concurrence, the Government can subsequently apply these rates to its relevant assets, to derive the Net Investment Returns Contribution for use in Budget 2022."

The Net Investment Returns Contribution has been the single largest contributor to government coffers, overtaking corporate and personal income tax. For the 2021 financial year, it is expected to bring in some $19.6 billion - close to 20 per cent of the $107 billion Budget. Ministers have said the framework allows for a stable, sustainable source of income for the Budget, smoothed out over market cycles.

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A version of this article appeared in the print edition of The Straits Times on December 01, 2021, with the headline President briefed on Covid-19's impact in lead-up to Budget. Subscribe