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Fiscal Policy
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Fiscal policy in Singapore is directed primarily at promoting long-term economic growth, rather than cyclical adjustment or distributing income. To meet its objective, the Singapore Government is guided by the following principles in its conduct of fiscal policy in Singapore: |
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the private sector is the engine of growth, and the government's role is to provide a stable and conducive environment for the private sector to thrive; |
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tax and expenditure policies should be justified on microeconomic grounds and focus on supply-side issues, i.e. incentives for saving, investment and enterprise; |
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the counter-cyclical role of fiscal policy is limited, due to high import leakages. |
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The success of Singapore's fiscal policy over the years lies in the government's prudent expenditure patterns and conducive taxation policies that have complemented monetary policy in promoting sustained and non-inflationary economic growth.
The main focus of the Government's expenditure is on the delivery of essential public goods and services to Singaporean. The government spends to assure the nation of a secure future. Therefore, key areas of expenditure are on education, public housing, health care and national security. The Government is also committed to building and maintaining world-class economic infrastructure and services. This is evidenced by the fact that development expenditure accounted for around one-third of government expenditure on average over the last three decades.
Singapore's tax policies, although providing the main source of funding for the government, seek to enhance its economic competitiveness and attract foreign investments to Singapore.
This combination of fair tax policies and prudent expenditure programmes, augmented by high economic growth has enabled Singapore to enjoy consistent budget surpluses over the years. Such a prudent fiscal policy has also contributed to Singapore's high savings rate and allows it to achieve one of the highest investment rates in the world without having to incur foreign debt. High domestic savings have, in turn, contributed to Singapore's high level of foreign reserves, which has served to boost investor confidence and provided a buffer against adverse economic shocks.
With this ethos of fiscal rectitude, which extends throughout the public sector, the MAS has been able to focus on its primary goal of ensuring price stability and preserving confidence in the domestic currency through the appropriate management of the S$ exchange rate, without needing to balance this against the requirements of deficit financing.
Please refer to the Ministry of Finance website for more information on Singapore's fiscal policy. |
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