Singapore

President Halimah briefed on impact of Covid-19, climate change on investment returns in lead up to Budget 2022


SINGAPORE – Work to prepare for next year’s government Budget has begun. President Halimah Yacob was briefed on Monday (Nov 29) by Finance Minister Lawrence Wong and other officials on the expected long-term real rates of return on Singapore’s assets, with a focus on how Covid-19 and climate change will affect the investments.

This projection is important because it affects how much of the reserves the Government can include in its annual Budget for current needs.

The Budget is traditionally presented in Parliament by the Finance Minister in mid-February, but planning and consultation begin several months earlier.

In a Facebook post on Monday, President Halimah said that she had met Finance Minister Lawrence Wong and officials from the Ministry of Finance to discuss the Government’s spending limit under the Net Investment Returns framework.

Senior representatives from GIC, the Monetary Authority of Singapore (MAS) and Temasek were also present.

Under the 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 three entities manage Singapore’s reserves.

Madam Halimah added that greater attention was paid this year to the long-term effects of Covid-19 and climate change on the investments, and how these events would impact how the expected long-term real rates of return are derived.

“I am satisfied that our agencies are looking closely into these issues,” said President Halimah, who holds the second key to past reserves in her custodial role.

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As with previous such meetings, she had also discussed with Mr Wong and the officials the global economic outlook, as well as the methodologies and basis on which the projections were derived and certified by the respective boards of the three entities.

President Halimah has referred the proposal to the Council of Presidential Advisers for its advice. She said she would give the Government her response after the Council has given its input, adding: “With my concurrence, the Government can subsequently apply these rates to its relevant assets, to derive the Net Investment Return Contribution for use in Budget 2022.”

The Net Investment Return Contribution has been the single largest contributor to government coffers, overtaking corporate and personal income tax.

For the 2021 financial year, it is expected to bring in some $19.6 billion – close to 20 per cent of the $107 billion Budget.

Ministers have said the framework allows for a stable, sustainable source of income for the Budget, smoothed out over market cycles.





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