President Tharman briefed by DPM Wong on projected returns from investing Singapore reserves

PRESIDENT Tharman Shanmugaratnam and the Council of Presidential Advisers were briefed on Jan 8 by Deputy Prime Minister and Finance Minister Lawrence Wong on the projected returns from investing Singapore’s reserves.

At the briefing – ahead of Budget Day on Feb 16 – DPM Wong and officials from the Ministry of Finance (MOF), and investment entities GIC, Monetary Authority of Singapore (MAS) and Temasek outlined the impact of major factors, like climate change and the weakening of global order, on returns expected over the long term from investing the reserves.

GIC, MAS and Temasek play a key role in the investment of Singapore’s reserves.

In a Facebook post on Jan 8, Tharman said the president must agree with their investment projections each year before the government can spend investment returns in the annual Budget.

He said: “Why does this matter to Singaporeans? For every dollar that the government has to spend in Singapore, almost 20 cents come from our reserves.

“And the whole system is designed to ensure that every generation of Singaporeans benefits from this contribution from our reserves. Including our great-grandchildren and those that come after them.”

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Tharman added that it is the opposite of what many other countries experience because they have rising debts to pay for.

“So, on top of the taxes that most countries need to support ageing populations and rising healthcare costs, they have to use more and more tax dollars to pay for what they have borrowed,” he said.

Under the Singapore framework, the quantum of returns that can be spent by the government each year is based on the long-term projections of the returns likely to be earned from investing the reserves.

This annual contribution to the Budget is known as the Net Investment Returns Contribution (NIRC).

Under the NIRC 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 president, who holds the second key to past reserves, consults the Council of Presidential Advisers before providing a response.

In the event that the government and the president do not agree to any of the expected rates of return, historical average rates of return from the past 20 years will be used to determine how much the government can spend.

In his post, Tharman said Singapore is the only country that is not an oil producer to reap significant returns from its reserves each year that can be spent for the good of Singaporeans.

“It is an outstanding fact,” he said.

“Let’s keep this Singapore system working well. It is for everyone’s good. Today and way into the future.”

According to the MOF portal, MAS and Temasek publish the size of the funds they manage. Up until Mar 31, 2023, the Official Foreign Reserves managed by MAS was S$416 billion, and the size of Temasek’s net portfolio value was S$382 billion.

The size of the government’s funds managed by sovereign wealth fund GIC is not known, except that GIC manages well over US$100 billion (S$133 billion).

Revealing the exact size of assets that GIC manages will, taken together with the published assets of MAS and Temasek, amount to making public the full size of Singapore’s financial reserves, said MOF on its website.

In Parliament in October 2023, Aljunied GRC MP Gerald Giam from the Workers’ Party had asked if it was still necessary to avoid publishing the total assets managed by GIC to defend the Singapore dollar from speculative attacks.

In response, DPM Wong had said: “Just as our defence forces do not reveal the full extent of our weaponry and military capabilities, it is not in Singapore’s interest to disclose the full size of our reserves.” THE STRAITS TIMES