$1T reserves: Why still horde huge Budget surpluses?


Why are our reserves so secretive?

I refer to the article “Singapore is a model for how to reform some of the world’s most-flawed investment vehicles” (The Economist, Aug 17).

It states that “The aim is to ensure that the pool of reserves and their income remain constant as a share of GDP over time, which Singapore has achieved; its capital is about 200% of GDP.”

Since Singapore’s GDP was US$323.91 billion (S$446.3 billion) in 2017 – does it mean that Singapore’s reserves are about $1 trillion (S$446.3 x 220%)?

If this is the case, why is it that we had about $30 and $200 billion of reported Budget surpluses and Cash Budget surpluses, in the last decade or so?

Also, why is the amount of reserves a secret?

As to “Relative to the pack, Singapore is doing well. Its funds have assets of about $770bn (S$1.06 trillion) —the exact figure is secret. They have made an annual return (in dollar terms) of about 6% over the past two decades, slightly more than an indexed portfolio with two-thirds of its assets in shares and one-third in bonds.

The reserves have special protection under the constitution. Under rules put in place in 2008, the government can spend up to half of the long-term expected annual real return of its net reserves each year. In practice this equates to about 1.6% of the funds’ capital value” – does it mean that the Government may only be using about a quarter of the average annual returns of 6%(1.6% divided by 6%)?

If so, are we being somewhat ‘too prudent’, on top of the huge surpluses?

Also, if the average return is 6% – why only pay Singaporeans just 2.5% on the CPF Ordinary Account?

Leong Sze Hian

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.