Fiscal Policy

Singapore practices a prudent fiscal policy, which complements the monetary policy in promoting sustained economic growth without inflation. Fiscal rules require a balanced budget over the term of the Government.

The key reasons for Singapore’s successful fiscal policy are prudent expenditure programmes and fair tax policies.

Prudent Expenditure

The main focus of the Government's expenditure is on delivering essential public goods and services to Singaporeans.

Key areas of expenditure are on:

• Education, public housing, health care and national security.
• Building and maintaining world-class economic infrastructure and services.

Development expenditure has accounted for around one-third of government expenditure on average over the last three decades.

Fair Tax Policies

Taxes provide the main source of funding for the government. At the same time, Singapore's tax policies aim to make its economy more competitive and attract foreign investments to Singapore.

Principles of Fiscal Policy

Singapore’s fiscal policy is directed primarily at promoting long-term economic growth, rather than at cyclical adjustment or distributing income.

Therefore, the Singapore Government adopts the following principles to meet its objective:

• 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.
• Tax and expenditure policies should be justified on microeconomic grounds and focus on supply-side issues, i.e. incentives for saving, investment and enterprise.
• The counter-cyclical role of fiscal policy is limited, due to high import leakages.

Budget Surpluses

Singapore has enjoyed consistent budget surpluses over the years. Its high savings rate allows it to achieve one of the highest investment rates in the world without having to incur foreign debt.

High domestic savings have also provided Singapore with ample foreign reserves. This has boosted investor confidence and provided a buffer against adverse economic shocks.

For more on Singapore's fiscal policy, see the Ministry of Finance website .