On Wednesday, Deputy Prime Minister and Finance Minister Lawrence Wong and other officials briefed President Halimah Yacob on the expected long-term real rates of return on Singapore's investment assets.
The government uses these forecasts to assess how much of the nation's historical reserves it will be able to use for the next budget.
In a Wednesday evening Facebook post, Madam Halimah revealed that the Council of Presidential Advisers (CPA) as well as officials from the Ministry of Finance (MOF) and senior members from GIC, the Monetary Authority of Singapore (MAS), and Temasek attended the meeting.
Madam Halimah stated, "We had an in-depth discussion on the global economic outlook, key structural risks such as heightened geopolitical tension and the impact of climate change, and the methodology used to create (these) estimates."
GIC is the Republic's sovereign wealth fund and one of the three investment institutions in Singapore, together with MAS and Temasek, that manage the Government's reserves.
Madam Halimah has previously stated that the briefing is a vital element of the yearly Budget cycle, since it is during this time that the President, in conjunction with the CPA, reviews the assumptions used in the forecasts of expected returns.
Under the Net Investment Returns paradigm, these rates are used to calculate the amount the government may spend.
After removing obligations like as government bonds, the framework permits the government to include up to 50 percent of the estimated long-term real returns on net assets invested by GIC, MAS, and Temasek in the budget.
Traditionally, the Budget is delivered to Parliament by the finance minister in mid-February, but planning and consultation begin many months before.
Wednesday, Madam Halimah reported that the boards of GIC, MAS, and Temasek have reviewed and certified their respective estimates, and that the Government has done a comprehensive and independent evaluation of the assumptions and techniques utilized by the three organisations.
In her custodial capacity, Madam Halimah, who has the second key to historic reserves, stated that she will issue a response after examining the Government's proposal with the CPA.
In the event that the Government and the President cannot agree on any of the predicted rates of return, the average historical rate of return over the last 20 years will be used to calculate the maximum amount the Government can spend.
This month, the Workers' Party (WP) reaffirmed its request to increase the limit on net investment returns that may be spent in the Budget from the current 50% to 60% in lieu of a goods and services tax (GST) increase. They also proposed using property sale earnings to support existing expenditures.
During the discussion on the GST (Amendment) Bill, Sengkang GRC MP Jamus Lim stated that it is equally feasible to oversave as it is to undersave. In response, Potong Pasir MP Sitoh Yih Pin stated that saving is a virtue for a tiny country like Singapore with no natural resources.
On Tuesday, Senior Minister of State for Finance and Transport Chee Hong Tat wrote in an article that the debate revealed fundamental differences in the People's Action Party and the WP's political values and attitudes toward fiscal discipline, and that the WP's proposals would deplete the reserves and leave less for future generations.
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