By Chris Kuan
A friend asked me to explain the table that Leong Sze Hian extracted from Singstat in his article in TOC “Singapore had $190b cash (Budget) surplus between 2005 to 2014?“. The table is tagged below.
I don’t have all the marbles together but here goes.
The most important line item is Cash Surplus / Deficit which provide the data on the actual surplus or deficit generated for the year. This line item is different from the surplus or deficit reported in the budget as I explained yesterday.
There are small omissions due to particular way of accounting for expenditure allocated to funds and endowments and large omissions relating to land sales and retained earnings from investments. This is what the World Bank and International Monetary Fund (IMF) takes as the standard reporting worldwide.
Under Cash Surplus / Deficit, pay attention to the sub line item titled “Net Cash Flow from Investment in Non Financial Assets”. This equates to what the World Bank and IMF termed as “Net Acquisition of Non Financial Assets”.
This line item gives us the figure for revenues generated from sale of land, possibly buildings and facilities, less expenditure on the same items. In a year, where the number is positive means the amount spent on acquiring or developing land, building and facilities acquisition exceed revenues generated from sale of the same items.
The line item “Net Cash Inflow from Financing Activities” relates mostly to the sub line item “Net Incurrence of Liabilities”. The refers to cashflow generated by changes in the debt level of the government. As can be seen, except for 2013, there is an increase in liabilities and this should not surprise because of the net inflow of funds into CPF which are invested in government bonds.
An increase in the amount of liabilities do not necessarily mean an increase in indebtedness as an expanding GDP allow an increase in debt without increasing the debt to GDP ratio if kept within limits of nominal GDP growth. The negative number in 2013 could be due to a shift of short term financing from the issuance of Treasury Bills to the issuance of Monetary Authority of Singapore (MAS) Bills which has the effect of shifting debt from the government to the MAS.
The total amount available each year to be invested by our investing agencies – GIC, MAS and Temasek, should be the Cash Surplus / Deficit plus the Net Inflow from Financing Activities. The Cash Surplus / Deficit should be regarded as additions to the reserves but not the Net Inflow from Financing Activities because the reserves is defined as net assets. The Net Inflow from Financing Activities are encumbered by debt and therefore in the strict sense, not reserves.
Hope this explains…a little. Please note terms such as “net assets”. “encumbered” are central bank speak which Mr. Tharman himself used when answering Parliamentary questions.