Singapore’s Budget framework has adapted well to challenges including ageing, slower growth: OECD
Maintain direction, continue focus on medium-term outlook as expenditure needs grow
THE OECD (Organisation for Economic Cooperation and Development) has released a paper on Singapore’s budgeting framework. While Budgeting in Singapore in 2025 is not meant to be a report card – it is more of a reference point prepared by an independent organisation – the paper paints a positive picture of Singapore’s budgeting processes.
Government budgeting is an important part of the work of any government and the OECD, as a global policy forum, often takes a closer look at what countries around the world do.
Deputy head of budgeting and public management at OECD Andrew Blazey told The Business Times: “It’s to understand the challenges of the job and recognise that as ministries of finance and governments work to improve these issues, there are usually aspects of budgeting that don’t have easy solutions.”
OECD last issued a paper on Singapore’s budgeting processes back in 2006.
This report notes that Singapore has adapted its Budget framework in response to changes in the rate of economic growth, increases in the expenditure needs of its population, a global health pandemic, and policy initiatives that range from climate action to national security. It also notes the government’s steps to strengthen Budget transparency.
Singapore has an international reputation for fiscal discipline in budgeting and policies that support long-term fiscal sustainability, OECD said.
However, the years of high economic and population growth in Singapore from the 1990s and 2000s are behind it. Economic growth is moderating, the population is ageing and birth rates are well below the replacement rate.
Given these challenges, Singapore is having to adapt to a tighter fiscal position while maintaining long-term fiscal sustainability, the OECD paper says.
Three areas are discussed in the report: effective Budget management, driving transformation and efficiency as well as communication and transparency.
Effective Budget management
The report notes that the Singapore government has already put in place various reforms over the years as it recognises it is likely to face a tougher fiscal outlook.
For example, there is the net investment returns framework, which allows the government to access up to half of the expected long-term real returns from reserves accumulated in previous terms of government.
Also, with a generational upgrade of infrastructure, this will lead to higher capital expenditure. The government now has the ability to borrow for nationally significant capital expenditure.
Driving change and transformation
This covers how reforms have been implemented to generate greater efficiency in public spending and greater collaboration for cross-cutting priorities, and a greater focus on innovation across government.
The government expects all ministries and statutory boards to make efficiency improvements from their business-as-usual activities. With the majority of Budget expenditure already determined through block allocations, such an approach sharpens the focus of the Budget process.
Another key characteristic is a balanced Budget across the term of government.
The OECD paper also highlighted Singapore’s strategy of meeting spending needs from long-term challenges. Money is set aside in specific purpose funds. One long-term challenge is climate change and a Future Energy Fund has been created to provide financial support to catalyse energy transition.
Blazey pointed to these specific purpose funds, the usual spending for health and education for example, as well as the reserves which can be tapped in rare circumstances. “Put together, with all these different elements, it shows that the arrangements for fiscal discipline and fiscal management are very strong in Singapore,” he said.
Communication and transparency
The report highlights that the Ministry of Finance has increased its capacity to communicate how the government uses the Budget to support Singaporeans. Communication is important as it can increase public understanding of public financial management and how the Budget responds to the needs of businesses, communities and individuals.
There is national consultation with residents, such as the 2022-2023 Forward Singapore exercise where the consultation helped to inform how the Budget can better support Singaporeans in various areas such as housing and health.
What’s next?
Challenges remain. For example, the ministries can increase their own workforce but the rate of growth is dependent on the growth of Singapore’s resident labour force. Over time, with an ageing population, this may mean that ministries will have to deliver services but without a proportionate increase in manpower.
As the paper is not an evaluation of the budgeting framework, there are no specific recommendations for improvement, although it affirms Singapore’s direction.
While OECD notes that Singapore has fewer Budget reports than in most OECD countries, it recognises that the government has taken steps to increase the quality and transparency of Budget reports, including by publishing details on its medium-term fiscal outlook in its 2023 occasional paper.
“From an OECD perspective, these reforms would be reinforced by publishing macro-fiscal forecasts and economic assumptions more systematically to support public understanding of the government’s fiscal outlook,” the report noted.
Terence Ho, associate professor (practice) at the Singapore University of Social Sciences, points out that “publishing a medium-term fiscal outlook is important for government accountability in many countries, to ensure transparency and credible assumptions about spending and how to finance it”. This has been less of an issue in Singapore, where public spending has been prudent, and the government has in fact run persistent Budget surpluses in earlier decades.
He added: “With our expenditure needs growing, however, having a medium-term outlook becomes more pertinent, in order to reflect the fiscal envelope within which the government must operate. This was why MOF released a paper on medium-term fiscal projections in 2023.”
The OECD paper concludes: “The reforms to the Budget framework, its application, and gradual improvements to Budget transparency demonstrate the changing nature of budgeting in Singapore in the context of ongoing fiscal pressures. The OECD supports the initiatives to strengthen Budget transparency, particularly the focus on medium-term budgeting, fiscal sustainability, and initiatives that contribute to the public’s understanding of budgeting in Singapore.”
Singapore’s FY2025 Budget Statement will be delivered on Feb 18.
Copyright SPH Media. All rights reserved.
