Fiscal

We are committed to maintain a sound and sustainable fiscal system that enables us to realise our long-term plans for Singapore. We aim to run balanced budgets over the long term, while ensuring that there are sufficient resources to meet society’s needs.

What do we spend on?

Public spending is focused on public goods and infrastructure that enable our people and businesses to thrive and grow. We invest heavily in skills, education and infrastructure to develop our people and lay the foundations for long-term economic growth. We also commit a steady amount of spending on security and defence to safeguard our way of life.

As our society matures and ages, an increasing proportion of public spending has been channelled towards social spending. Over the last decade, we have almost doubled our social spending from $20 billion in Financial Year (FY) 2010, to $37 billion in FY2019.  Today, social spending makes up the largest part of annual government expenditure. A large part of the increase has gone towards improving the quality, accessibility and affordability of healthcare, for which spending has tripled over the last decade.

* Refers only to Ministries Expenditure, Excluding Special Transfers and Top-ups to Endowment/ Trust Funds
** There were 5 sectoral categories under Ministries Expenditure previously – 1) Social, 2) Infrastructure, 3) Economic, 4) Security and 5) Government Administration. Infrastructure is now subsumed under both Social and Economic expenditure to ensure consistency with the Analysis of Revenue and Expenditure document, which breakdowns Ministries Expenditure in 4 categories as shown above.

Planning for the long-term

Fiscal policy in Singapore is characterised by a strong long-term orientation. We plan far ahead to prepare for longer-term challenges such as ageing and climate change. Doing so enables us to intervene effectively upstream, to avoid more costly interventions downstream. It also enables us to help our society and economy adjust to the challenges. 

We are planning ahead to cater for several new spending priorities going forward, including health and aged care, pre-school education and SkillsFuture, strengthening our social security systems, renewing our city infrastructure, and protecting ourselves against new security threats.



In particular, government spending on healthcare will continue to rise to meet the needs of our ageing population. This will go towards giving our seniors greater assurance over healthcare, and a better quality of life.

Spending for outcomes

Even as we ensure sufficient public spending to meet our economy’s and society’s changing demands, we seek to maintain a light fiscal burden on taxpayers. We seek to achieve strong outcomes while delivering value for money for taxpayers. Today, government expenditure as a share of GDP is among the lowest across advanced economies.

Source: OECD database (https://data.oecd.org) and Hong Kong Census and Statistics Department (https://www.censtatd.gov.hk)
* This includes Special Transfers and Top-ups to Endowment and Trust Funds

While we spend relatively less of our GDP as a Government, we focus on the quality rather than the volume of spending. In areas such as education, health, policing, we have consistently achieved outcomes near the top internationally (e.g. PISA, healthy life expectancy, Gallup law and order index) despite low levels of spending as a percentage of GDP.

Sources: WHO (Global Health Expenditure Database) and World Bank Data. MOF data is proxied using MOH total expenditure
Note:
Expenditure data as of 2019 - For Singapore we used 2019 for GDP, FY2019 for healthcare spending. For other countries, healthcare spending is as % of GDP is 2019 or latest avail year.
Life expectancy as of 2019 - latest available is 2019

Sources: UNESCO Institute for Statistics, OECD, MOF. Data for Singapore is proxied using MOE total expenditure.
Note:
Expenditure - For Singapore we used 2019 for GDP, FY2019 for education spending. For other countries, education spending as % of GDP is 2019 or latest avail year.
PISA scores - latest available is 2018

 

Stewarding our resources for the future

Financial strength helps a small country with no natural resources like Singapore to respond effectively to crises. Over the years, we have been prudent and disciplined in building up our reserves. Our reserves have allowed us to deal with unexpected shocks such as the COVID-19 outbreak and be able to respond decisively by supporting Singaporeans and our workers amidst the pandemic. Unlike many other countries, our reserves have allowed us to do so without borrowing heavily and passing on the financial burden to future generations.

The total draw on reserves is up to $42.9 billion from FY2020 to FY2022, less than the initial sum of $52.0 billion announced at the Fortitude Budget in FY2020. This is in part because of our swift and decisive response to the pandemic, which enabled us to avert worse public health outcomes. It reflects our prudence in the use of reserves.

Our reserves also contribute significantly to our current revenues.  We have invested our reserves for the long-term, and the returns generated from investing our reserves are shared between present and future generations. Part of the investment returns generated supplement our annual budget through the Net Investment Returns Contribution (NIRC). Today, the NIRC forms the largest, single component of Government revenues. We have to plan our revenues prudently, to ensure that each generation contributes and benefits fairly from the Budget.

This is unlike the situation in many other advanced economies today. Most advanced countries pay about 2% of their GDP in debt servicing of accumulated debt (as shown at the lower half of the chart below). They collect taxes to pay off these debts. In Singapore, it is the opposite – we have grown a steady stream of returns from investments of our reserves for current spending (as shown in the top half of the chart below), which helps to keep our taxes low. This in turn helps to support many important areas of expenditure that are important to Singapore’s development and future growth. For example, the annual amount from NIRC is larger than our annual spending on education.

*Investment returns refers to Net Investment Returns Contribution. Interest payments refer to net general government interest payments, retrieved from OECD Economic Outlook No. 106 (Nov 2019)