Speech in Support of Motion on Public Finances

Mr Speaker,

PSP has raised this motion today because we believe that it is important for Singaporeans to have a national conversation about our Budget and reserve accumulation policies. While we agree that there are benefits in having reserves to cope with unforeseen circumstances, we are of the view that there comes a point beyond which continued accumulation of reserves hurts the welfare of and compromises the quality of life of present-day Singaporeans.

$1.2 trillion estimate of the Reserves

First, let me explain how we arrived at the estimate of $1.2 trillion for our financial reserves.  We used two different methods.

The first method is to add together the assets managed by GIC, Temasek, and MAS. This method was used by CNA in the documentary, “Singapore Reserves: The Untold Story” in August 2023.

Based on latest available figures, Temasek’s Net Portfolio Value is $382 billion[1]. The Official Foreign Reserves (OFR) managed by MAS is $461 billion[2]. However, this figure does not include the $247 billion[3] of Reserves Management Government Securities (RMGS) issued when MAS transferred excess OFR to the Government.

The value of the assets managed by GIC is secret. But even if we only add up the assets under Temasek and the OFR and RMGS under MAS, we get a minimum estimate of the financial reserves of $1.09 trillion.

The second method is to use the latest Government Financial Statements.

The total financial assets is $1.73 trillion as of end-March 2023. Government borrowings total at $1.08 trillion.  Subtracting government borrowings from total assets, we arrive at a net financial assets of $0.65 trillion.

Government Financial Statements or GFS do not include the assets of statutory boards like the MAS.  So by adding up the net assets under GFS, and the OFR and RMGS under MAS, we arrive at a total of $1.36 trillion.

Hence, we believe that the size of the Financial Reserves is somewhere between $1.09 trillion and $1.36 trillion.  We therefore feel that $1.2 trillion is a reasonable estimate.

We then looked at this $1.2 trillion estimate from a third angle using the NIRC, which is half the long term expected real investment returns.  Using net investment returns of $47b[4] divided by $1.2trillion, we get a real rate of return of 3.9% which appears to be reasonable.

We have given a detailed explanation for the basis of our reserves estimate of $1.2 trillion.  If DPM and Finance Minister disputes this figure, I hope he can explain why.

How CPF contributes into the reserves

Mr Speaker, my colleague Mr Leong Mun Wai has spoken on how land costs contribute to the growth of our reserves. I will talk about how the higher rate of returns achieved on CPF savings and the lower interest rate paid to CPF members contribute further to the building of the reserves.

As at end 2022, Singaporeans have accumulated $545 billion[5] in CPF savings. These savings are used to buy government securities and is then passed on to be managed by GIC and MAS.

GIC has disclosed that its nominal rate of return was 6.9% on average in the last 20 years, in US dollar terms.  If we take into account the depreciation of US dollars relative to Singdollars over the same period[6], we can estimate that the rate of return is about 5.4% in Singdollar terms.

The Minister for Manpower has told us last year that CPF members earn on average an interest rate of close to 4%.

This difference between the rate of return earned by GIC and that paid to CPF members of 1.4 percentage point goes directly into the reserves and could now be around $7b per year.

Will the Government disclose the average difference between the rate of return it has earned from investing CPF savings and the interest rate paid to CPF members over the last 20 years? How many billions of dollars have Singaporeans contributed into the reserves through our CPF savings?  Could these returns not have been paid out to CPF members?

Costs of over-accumulating reserves

I shall now touch on the costs of excessive reserves accumulation.

If we do not put the excess returns from CPF savings into the reserves, it can be paid to CPF members to improve their retirement adequacy.  A 1.4% difference in return may not seem like much but it makes a big difference over a long time. For example, a savings of $50,000 earning an interest of 4% would grow to $162,000 after 30 years. If the interest rate were 5.4%, it would grow to $242,000.

Reserves accumulation thus comes at the cost of lower retirement adequacy.

Reserve accumulation also comes from charging land costs for public housing.  As my colleague Mr Leong Mun Wai has explained, this is a major expense item for HDB which must be paid from government revenue.  If land cost was not an expenditure item, the need for government to raise revenue by raising taxes like GST would be reduced. The recent GST hikes came at a very bad time and directly added to the cost of living pressures faced by many Singaporeans.

Moreover, the prices of HDB flats even after subsidies and grants are still considered high by many young couples as the land cost is high. This can have an adverse effect on their decision to have children.

PSP also believes that it is excessive to put all land sales proceeds into the Reserves. Since land is no longer sold freehold, it is effectively a renewable source of income for Singapore. Land sales revenue should be recognised as revenue divided over the lease tenure. This will further reduce the need to raise taxes and  impose further financial burden on taxpayers.

Mandarin speech

Mr Speaker, Mandarin please.


新加坡前进党今天提出这项动议,呼吁政府检讨我国的储备金积累政策,在减轻当代国人的经济负担和为下一代国人储蓄之间, 取得更好的平衡。

拥有储备金的益处是毋庸置疑的。 有危机时,充裕的储备金能让我们从容应对。但储备金的累积不是没有代价的。储备金多一分的累积,便是多一分的税金,或是少一分的用之于民。在储备金日渐充裕,而人民的经济压力却渐渐加重的情况下,我们觉得有必要检讨现有的政策。

据我们估计,政府所积累的储备金已达一万两千亿新元。 这是政府一年的支出的十二倍。换句话说,即便政府停止征税,单靠储备金,也足够政府维持十二年的运作。





Sir, our reserves are built up through collecting more from taxpayers than the Government spends on Singaporeans.

As our population ages, and the generations that have built up the reserves enter age groups where higher healthcare expenditures are incurred, it is timely to review our reserve accumulation policies.  For example, should we be funding the higher healthcare expenditures through raising additional taxes like GST, or should we choose to slow down the building up of reserves and use land sales proceeds instead?

To answer such questions, we need accurate information on the financial status of the Government.  I agree it is difficult to specify an amount or level as being enough financial reserves.  However, that does not mean there is nothing to guide us on a suitable pace for reserve accumulation.

For example, we can look at the household savings in relation to the size of our reserves. According to the OCBC Financial Wellness survey 2023, more than half of Singaporeans have savings of less than 6 months salaries.  When we compare this with the Government’s savings of 12 years of expenditure, does this not tell us where the need is more urgent?  Does this tell us that it is appropriate to choose to raise GST now, rather than disrupt the flow of land sales proceeds into the reserves?  PSP does not think so, and we have said so before.

We keep hearing that the reserves are for the benefit of our children and grandchildren. But our total fertility rate has fallen to 1.05, which is half the replacement rate of 2.1.  This means that the number of our children is halving with each generation.  So who exactly are we leaving our ever-growing reserves to?  If not for over 20,000 new citizenships granted each year, our citizen population will start shrinking significantly in the coming years.

PSP calls on the Government to review our approach towards the reserves and seek a better balance between the needs of present and future generations.

Thank you.

[1] Temasek Review 2023 – Mar 2023

[2] https://www.mas.gov.sg/statistics/reserve-statistics/official-foreign-reserves –  Nov 2023. Dec 2023 figures not used because it is indicated as projected figures.

[3] https://www.mas.gov.sg/statistics/reserve-statistics/reserves-management-government-securities – Dec 2023

[4] Budget 2023, NIRC estimated at $23.48b

[5] CPF annual report 2022 Key CPF statistics

[6] 2003 to 2023, 1 USD has gone from 1.77 SGD to 1.33 SGD