Lee Hsien Yang: If SG conforms to IMF accounting, Budget surplus would be even more massive

In a social media post on Wednesday (Mar 2), Lee Hsien Yang weighs in on Singapore’s “massive budget surplus”, on the day when Parliament approved the country’s third straight deficit in a row.

In a Facebook post, he says: “Singapore has historically run a massive budget surplus every year” and the way the surplus is calculated does not conform to the accounting methods used by the International Monetary Fund (IMF).

“Adjust for that, it would be even more of a surplus!”, says Mr Lee, who is the estranged younger brother of Prime Minister Lee Hsien Loong.

The younger Mr Lee then shares an excerpt from a 2020 commentary from the academia.sg website. In this article, Manu Bhaskaran, CEO of Centennial Asia Advisors, and Professor Emerita Linda Lim of the Stephen M. Ross School of Business at the University of Michigan, argue that Singapore would benefit from a slower pace of reserve accumulation.

In their paper, titled Government surpluses and foreign reserves in Singapore, they wrote: “The government runs a budget surplus when tax revenues (T) exceed government spending (G), which in Singapore has amounted to above 5 per cent and often above 10 per cent of GDP nearly every year since 1990, by the Singapore government’s accounting.

“The different method used by the International Monetary Fund shows a fiscal balance roughly 5 to 7 percentage points higher in 2011-15. This means the government has taken in from the public, including private business, more than it has given out every year, for nearly two generations.”

In the paper, they explain that a public sector surplus always equals a private sector deficit, “but the size and longevity of Singapore’s annual budget surpluses would be historically unprecedented worldwide in the post-feudal capitalist era”.

In Parliament on Wednesday, Finance Minister Lawrence Wong said firmly that Singapore could not take what he called the easy way out and it would stick to husbanding its reservers and not change its approach to the country’s reserves.

This was in response to calls by the Workers’ Party and Progress Singapore Party to adjust the Net Income Returns Contribution, or NIRC, to allow recurrent spending to rise to 60 per cent from the existing 50 per cent. The WP and PSP also want to include part of the proceeds from land sales to count towards recurring revenue.

Both Opposition parties see this as alternatives to raising the goods and services tax, which is scheduled to rise by one percentage point next year, and a further percentage point in 2024, to 9 per cent.

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