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In this Explainer, find out...
What are government reserves, and why are they important?
How does Singapore manage its reserves?
How does Singapore’s reserve management strategy compare to that of other countries?
Introduction
Singapore holds one of the largest government reserves in the world. Although their full size remains a national secret, the funds held by the Monetary Authority of Singapore (MAS) and Temasek Holdings amount to more than S$800 billion!
But what exactly are the reserves, and why do they matter? In this Policy Explainer, we will explain what the government reserves are and why they are important. It will also cover how they are managed in Singapore and how Singapore’s management strategy compares to other countries.
Government Reserves
What are Government Reserves?
The Ministry of Finance (MOF) defines Singapore’s reserves as “the total assets minus liabilities of the Government and other entities specified in the Fifth Schedule under the Constitution”. In other words, the reserves are the total value of assets the Government owns after subtracting its debts and other financial obligations. These assets are held or managed by entities listed in the Fifth Schedule in Singapore’s Constitution (more on this later).
Importance of the Reserves
Crisis Protection
The 2007-2008 Global Financial Crisis caused significant economic damage worldwide. Banks struggled to remain solvent and global trade shrunk. This placed export-dependent economies like Singapore at great risk. Indeed, Singapore was the first Southeast Asian country to fall into recession; retrenchments rose and local employers cut wages and working hours.
In 2009, the Government responded by introducing costly measures to rescue viable enterprises, protect jobs and support households. These measures, dubbed the Resilience Package, had a hefty price tag of S$20.5 billion. The following year, Singapore saw one of the fastest rates of economic growth in the world, launching its economy towards a strong recovery.
Over a decade later, the COVID-19 pandemic placed Singaporean lives and livelihoods at risk. Singapore spent considerably more in this battle, spending S$72.3 billion in Financial Years (FY) 2020 and 2021 on public health measures and support for businesses, workers and families. Unlike most other governments, Singapore emerged from the pandemic without taking on any additional debt.
How were these feats possible? Both crises were similar in two respects. First, their large-scale impact and potential for widespread damage necessitated costly policy responses. Second, Singapore largely covered these costs with a drawdown of its past reserves.
Without the reserves, Singapore would have had much less money to spend on protecting people during these unforeseen crises. This illustrates the importance of keeping our reserves healthy—you never know when a disaster will strike or when you will need the money.
Macroeconomic Stability
Beyond crisis protection, Singapore’s reserves act to maintain macroeconomic stability. Specifically, MAS uses Singapore’s foreign exchange reserves, the Official Foreign Reserves (OFR), to manage Singapore’s exchange rate, thereby ensuring medium-term price stability, i.e., keeping inflation consistently low and stable for at least a year.
In more detail, the OFR refers to the amount of foreign currency assets that MAS holds as reserves. It allows MAS to manage the Singapore dollar nominal effective exchange rate (S$NEER) so that it does not fluctuate beyond a policy band set by MAS. This is achieved by selling foreign currency assets in the OFR when the S$NEER is above the policy band, bringing down our exchange rate, as well as buying foreign currency assets and storing them in the OFR when the S$NEER is below the policy band, increasing our exchange rate.
By keeping our exchange rate within a fixed band, Singapore also keeps the prices of imported goods and services fairly stable. Since a large share of the goods and services we consume are imported, stable import prices also mean that overall prices remain stable. This protects our economy from external shocks, in turn strengthening confidence in our economy and financial system.
Financing Public Spending
Large amounts of public spending are needed to meet Singaporeans’ needs—in FY2024, the Government projected expenditures of S$111.8 billion for FY2024 to fund ministries’ budgets, monetary transfers to households and other measures. Such expenditures are projected during Singapore’s annual Budget and are typically financed through taxes.
However, there is another revenue source that made up S$23.5 billion (about one-fifth) of government revenue in FY2024—more than the budget of any single ministry. This revenue comes from GIC’s Net Investment Returns Contribution (NIRC), which are returns arising from the investment of Singapore’s reserves into long-term assets. Today, half of the NIRC is channelled to the Government for public spending. This portion of the returns has given Governments greater room for larger and recurring spending commitments.
A Balancing Act
Fiscal prudence lies at the heart of Singapore’s approach to financial management. On the one hand, building up Singapore’s reserves for use in crises reflects this—a long-term and disciplined approach protects future generations from being saddled with debt incurred by current and previous generations.
On the other hand, the reserves’ function as an endowment fund that supports public spending today reflects a different philosophical goal. Since half of the reserves’ investment returns are allocated to yearly spending, current Singaporeans also benefit from the prudent management of these reserves, not just future generations.
Managing the Reserves
The management of Singapore’s reserves is mainly guided by two pieces of legislation—the Reserves Protection Framework and The Fifth Schedule.
Reserves Protection Framework
The Reserves Protection Framework (RPF) is a set of constitutional rules that protects the reserves from being spent by a fiscally irresponsible government. In addition to the NIR Framework, these rules consist of:
The fair market value principle: All assets part of the reserves (e.g., land) must be sold at fair market value, with the revenue returned to the reserves.
The Second Key: When the Government wants to tap into the reserves to finance public spending today, it has to seek approval from the elected President.
The Fifth Schedule
Separately, the Fifth Schedule lists the entities holding or managing Singapore’s reserves. As of 2025, six entities are listed under the Fifth Schedule of Singapore’s Constitution, each holding or managing the reserves differently according to its mandate. These entities are:
Jurong Town Corporation: Manages industrial land used by companies in Singapore for commercial purposes.
Central Provident Fund Board: Manages Singaporeans’ savings. The Government guarantees payouts on CPF savings, including interest. The reserves would need to be drawn on if the Government cannot cover this guarantee.
Housing & Development Board (HDB): HDB purchases state land for residential development. This land has to be taken out of the Past Reserves and purchased by HDB at fair market value, with the proceeds going into the reserves.
Monetary Authority of Singapore: Manages Singapore’s Official Foreign Reserves (OFR).
Temasek Holdings (Temasek): Temasek aims to maximise long-term shareholder value. Most of its portfolio is invested in Singapore, including government-linked companies such as Singapore Airlines and Keppel.
GIC: A sovereign wealth fund that manages most of Singapore’s financial assets on behalf of the Government. It invests for the long term to generate good returns above global inflation rates, enhancing the funds’ international purchasing power.
By having the RPF and the Fifth Schedule in the Constitution, sound management of the reserves becomes an institutional imperative—an objective that should not be abandoned.
However, effective management of the reserves goes beyond protection. As spending needs increase continuously, it is not enough to keep the stored value in the reserves stagnant. So how does Singapore tackle this need for growth, and how does its approach compare to its counterparts?
Growing the Reserves: An International Comparison
A sovereign wealth fund (SWF) is an asset management firm that invests a government’s money to improve returns and grow the fund. Since Singapore established GIC, formerly the Government Investment Corporation of Singapore, the first non-commodity-based SWF, many other countries have followed suit.
Today, there are over a hundred SWFs worldwide. The largest among these are the Norway Government Pension Fund Global, and China Investment Corporation, both of which have succeeded in producing outsized returns. This section will highlight some similarities and differences between how Singapore, China and Norway manage their reserves.
Similarities
Just like how Singapore splits its reserves between the Fifth Schedule entities, China’s and Norway’s reserves are split into unique entities with their mandates. The entities include:
A central bank: As described earlier, central banks typically hold onto the country’s foreign exchange reserves, which can be used to manage the country’s currency exchange rate. For example, if the bank wants its currency’s value to increase. In that case, it might buy up its domestic currency with foreign dollars to increase demand for the currency and push the “price” of the currency up.
A sovereign wealth fund: Beyond the foreign exchange reserves, each country deposits surplus capital into a SWF. This is because central banks usually keep their monies in cash or cash-equivalent assets to buy and sell their currency at quick notice in response to market changes. Hence, the reserves held by the central bank are unlikely to appreciate much in value. Depositing additional funds with SWFs creates the potential for greater returns.
Notably, SWFs in all three countries invest in diversified assets across geographies and asset classes. Asset diversification is a key investment strategy that spreads money across different investments to reduce risk. Consider a stock portfolio with only one stock. If that stock falls by 50 per cent, the whole portfolio’s value would drop by 50 per cent. However, if a portfolio diversifies by splitting its money across five stocks equally, a 50 per cent drop in one stock’s price would cause the portfolio value to fall by only 5 per cent. This is illustrated below, where the shaded area represents the loss to a portfolio when a single stock’s value drops by 50 per cent.
Since China, Singapore and Norway invest public money, they each practice diligent risk management to ensure that public funds are well-protected. This is reflected in how they invest in different types of assets and regions, reducing the risk of any one asset’s failure from disproportionately affecting the portfolio.
Differences
1. The Withdrawal Rate of Each Fund
Each country withdraws different amounts from its funds every year, based on its unique circumstances and the purpose of its SWF.
Unlike Singapore, Norway withdraws up to 100 per cent of its fund’s expected return each year. These funds are used to finance growing fiscal deficits (when the government spends more than it earns) and are becoming an increasingly significant portion of total government spending.
This aligns with Norway’s goal of leveraging the fund’s returns to support government spending while protecting the fund's real value by restricting withdrawals beyond what the fund is expected to return. This means if the fund is expected to grow by seven per cent in a given year, the government can only withdraw that amount from the fund that year.
2. The Purpose of Each Fund
All three countries split their reserves between their central bank and SWF. However, the purpose of the SWF differs between countries. In Singapore, the main goal of GIC, its largest SWF, is to preserve and enhance the international purchasing power of the reserves.
In China, the CIC seeks maximum returns for its shareholders but also invests in key projects to further the government’s goals, such as by investing in companies as part of the Belt and Road Initiative and sponsored growing domestic technology firms.
Finally, in Norway, one of the reserves’ goals is to diversify the country’s economy away from its oil dependency. Since Norway’s oil industry contributes over 20 per cent of its GDP, the reserves’ investments are a key vehicle for the government to make the country less reliant on the volatile oil market.
The differences in purpose mean subtle differences in the investments each fund makes. These differences highlight how each SWF is unique and caters to its respective government’s objectives.
Conclusion
Singapore’s reserves have been prudently built and managed for over 50 years. Since then, they have played a key role in protecting Singaporeans during financial crises and acted as a valuable supplement to our budgets. The robust frameworks safeguarding the reserves have ensured their sustainable growth. As the Government continues to balance the competing priorities of growth, sustainability, and fiscal responsibility, the reserves will remain an important lever to facilitate the prosperity of current and future generations.
This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation.
By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.
The citations to our Policy Explainers can be found in the PDF appended to this webpage.
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