Operating expenditure in FY96 is projected to increase by $0.9 billion to $12.8 billion, a 8 per cent increase over FY95. As a percentage of total operating expenditure, defence accounts for the largest share at 42 per cent, followed by education at 24 per cent.

From FY96, operating expenditures have been classified into Running Costs and Transfers. Running Costs refer to the day-to-day operating expenditures of Government. It includes manpower and other operating costs. Transfers on the other hand refer to payments made by Government to the public and outside organisations. They include payments for public assistance. Scholarships, compensations, direct subsidies, contributions to local and international organisations are also classified as Transfers, as these are grants to bodies outside the civil service to carry out approved programmes. This reclassification will provide a better picture of the actual cost of running and maintaining government's services.

For FY96, Running Costs and Transfers will amount to $11.9 billion and $0.9 billion respectively. Compared to FY95, Running Costs will be higher by 7.4 per cent, while Transfers will be higher by 15.2 per cent.