SINGAPORE (Feb 11): The government’s operating revenue, which includes corporate income tax, personal income tax and GST, has nearly tripled from fiscal year 2005 to FY2017, rising from almost $28.2 billion to $75.2 billion. But that would not have been sufficient to fund its soaring fiscal expenditure as well as hefty special transfers including top-ups to endowment and trust funds. So, how did Singapore manage to fund the huge increase in fiscal expenditure? Quite simply, by leaning harder on its reserves.

Up until FY2008, under the Net Investment Income (NII) framework, the government could only spend investment income comprising dividends and interest. Today, the government relies on a larger proportion of the returns from its reserves. The Net Investment Returns Contribution (NIRC) now comprises up to 50% of the Net Investment Returns (NIR) on the net assets invested by GIC, the Monetary Authority of Singapore and Temasek Holdings, and up to 50% of the NII derived from past reserves from the remaining assets.

GIC and MAS came under the NIR framework in FY2009. That year, NIRC jumped to $7 billion from $4.34 billion in FY2008. In FY2016, Temasek was included under the framework, resulting in a jump in NIRC to $14.58 billion, from $8.94 billion in FY2015. In FY2018, NIRC funded Singapore’s national budget to an estimated $15.85 billion. That made up about one-fifth of the total estimated expenditure for FY2018.

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