Prime Minister Lee Hsien Loong highlights challenges in rebuilding national reserves amid slower economic growth.
Singapore’s Prime Minister Lee Hsien Loong has stressed that the country can no longer rebuild its reserves if they are depleted, due to slower economic growth and diminishing budget surpluses. In an interview discussing the nation’s reserves, Lee noted that unlike the rapid growth rates seen in the 1970s and 1980s, Singapore’s economy now faces more modest expansion, making it difficult to accumulate large surpluses for future use.
Lee explained that the reserves, which include a mix of financial and fixed assets, are a critical safety net for the country, particularly in times of crisis. He highlighted that Singapore cannot predict future needs, especially in the face of global uncertainties, such as market downturns or unexpected global events like the COVID-19 pandemic. Lee mentioned that the country had to draw substantial amounts from the reserves during crises, such as approximately S$40 billion during the pandemic, showcasing the unpredictable nature of future financial needs.
The Prime Minister also addressed common misconceptions about the reserves, emphasizing that there is no fixed amount that can be deemed “enough.” He reminded citizens that the reserves are essentially “rainy day money,” meant to be used in emergencies, not for routine spending.
Lee highlighted the government’s focus on ensuring that the reserves remain robust to secure Singapore’s financial future, even as spending needs rise due to an aging population. He noted that the government had already raised the goods and services tax as part of efforts to address these challenges.
The Prime Minister also provided insight into the investment structure of the reserves, including the role of Singapore’s sovereign wealth fund, GIC, and the Net Investment Return Contribution (NIRC) framework, which allows the government to use half of the investment returns for spending. Despite discussions on possibly creating another sovereign wealth fund, Lee expressed confidence in focusing on the current system to manage the country’s financial needs effectively.
