President Halimah briefed by DPM, officials as work begins on Budget 2021

Work to prepare for next year's government Budget has begun, with Deputy Prime Minister Heng Swee Keat and representatives from several agencies and investment entities briefing President Halimah Yacob and the Council of Presidential Advisers yesterday.

The Budget is traditionally presented in Parliament for debate in February, but preparation and consultation usually begin several months earlier.

In a Facebook post, Madam Halimah noted that yesterday's discussions centred on Covid-19 and its impact.

Apart from the near-term uncertainties brought on by the pandemic, she noted that a key question is also whether Covid-19 has fundamentally changed the investment landscape.

Other key questions Madam Halimah said needed to be studied are the structural shifts that Covid-19 has caused to the macroeconomic environment, and how these factors impact Singapore's long-term investment returns.

"We need a good handle on these issues, as we are effectively spending from our reserves based on these assumptions," she said.

"These are tough questions that we need to grapple with. There are no easy answers, but it is my responsibility as custodian of Singapore's past reserves to raise them for discussion.

"I am glad that the Government has also been thinking hard about these same issues."

Madam Halimah was briefed by Mr Heng as well as representatives from the Ministry of Finance (MOF), the Monetary Authority of Singapore (MAS), Singapore sovereign wealth fund GIC and investment firm Temasek on their long-term macroeconomic outlook and the Government's proposed expected long-term real rates of return.

The investment entities had earlier discussed forward projections of the returns with their respective boards, and MOF has reviewed these projections, said Madam Halimah. "With my concurrence, Government can later apply these rates to relevant assets, to derive the net investment return contribution (NIRC) for use in Budget 2021."

The net investment returns framework allows the Government to spend up to 50 per cent of the expected long-term investment returns generated by Temasek, GIC and MAS - the three entities tasked to manage Singapore's reserves.

The NIRC is the top contributor to the government coffers.

Mr Heng told Parliament in October that the design of the framework allows for a stable, sustainable source of income for the Budget, smoothed out over market cycles.