2.

Before I highlight the salient features of this year's expenditure budget, I would first like to recap on the FY99 Budget.

3.

The FY99 Budget was worked out based on the circumstances as at end 1998 and beginning 1999. Then, we were in the midst of a recession and were expecting negative growth for the year as a whole. With operating revenue estimated at $24.1 billion and a planned expenditure of $29.2 billion, the outcome would be a budget deficit of $5.1 billion. Operating revenue had been estimated on the basis of falling revenue while expenditure was planned on greatly increased Government spending, particularly in development spending, to stimulate the economy.

4.

Fortunately, events turned out quite differently as the economy rebounded strongly after the first quarter of 1999 and growth in 1999 turned out to be a respectable 5.4 per cent. The strong rebound is expected to raise operating revenue by about $4.8 billion. The increase has come mainly from stronger COE and income tax collections. On the other hand, total expenditure is expected to be some $3.4 billion less, mainly because of lower development spending. This was because strong competition for projects forced bid prices down, and because some lower priority projects were rescheduled.

5.

The combined impact of higher revenue collection and lower expenditure is that instead of a large budget deficit of some $5 billion, a surplus of $3.2 billion is expected in FY99. With a budget surplus now expected, the Government will within FY99 make a $100 million contribution to Medifund, to bring Government's total contribution in the Fund to $700 million. In addition, the Government will also make a $200 million contribution to the ElderCare Fund approved by Parliament on 22 February 2000.

6.

While transfers to Medifund and the ElderCare Fund are ways to share the surplus, they benefit Singaporeans indirectly. The Government appreciates that workers had accepted the CPF and wage cuts as part of the package to deal with the recession. However, the CPF cut can only be restored gradually so as not to increase business costs abruptly, thereby stalling economic recovery. As an additional gesture, the Government will make a special CPF top-up of $250 to the Ordinary Account of every Singaporean CPF member aged 21 years and above on 31 December 1999, who had made at least one CPF contribution within the period 1 January 1998 to 31 December 1999. More than 1.5 million Singaporeans are expected to benefit. The top-up will be credited in March 2000. Details will be released separately by the CPF Board. This top-up will amount to $385 million.