SINGAPORE – With a Budget deficit expected for this financial year, the Government plans on taking up to 50 per cent of the long-term expected returns from Singapore’s reserves, the maximum amount it can take into the Budget under the Net Investment Return Contribution (NIRC), said Second Minister for Finance Lawrence Wong.
From 2016 to last year, the Government had taken the maximum amount allowed under the Constitution, he added.
Mr Wong was responding to a question from Mr Louis Chua (Sengkang GRC).
The NIRC framework allows the Government to spend up to 50 per cent of the net investment returns on net assets invested by GIC, the Monetary Authority of Singapore and Temasek, and up to 50 per cent of the net investment income derived from past reserves from the remaining assets.
Since 2016, the NIRC has been the single largest contributor to government coffers, overtaking corporate and personal income tax, and goods and services tax (GST), the three largest sources of tax revenue.
For the 2021 financial year, it is expected to bring in some $19.6 billion, more than the $18.1 billion in 2020.
Mr Chua asked whether it was higher rates of return or a higher net asset base that contributed to the higher NIRC forecast for 2021.
To this, Mr Wong said that the breakdown is not available now as the process to determine how much NIRC the Government can draw is still ongoing.
“There will be a process based on what that smoothened base is, and then what the expected long-term rate of return is, and there are processes in place, as we have described in this House, to ascertain each of these figures, which then are submitted to the President’s office for the President’s approval,” added Mr Wong.
The estimated long-term real rate of return is calculated by the agencies responsible for investing the reserves.
The calculation affects how much the Government can include in its annual Budget for current needs, and this process is scrutinised by President Halimah Yacob in her custodial role.
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