Being included in the NIR framework does not impact the investment strategies of the three entities.
The NIR framework provides a formula to work out how much the Government can spend from the reserves, based on the expected long-term real rate of return of the investment entities on the framework. By basing the Government’s spending on expected long-term returns of the investment entities on the framework, the investment entities are not pressured to sell assets, realise capital gains, and pay more dividends. NIR framework is designed to ensure that the investment returns are tapped for spending in a disciplined and prudent way. (See Q25)
The Government has a healthy level of Government Deposits with MAS as well as a variety of sources of cash flows to meet its liquidity needs for day-to-day operations. This enables the Government to manage its liquidity needs independent of the cash flows from the three entities’ investment strategies. Unlike dividends which are separately determined, the NIR framework does not require any realisation of cash that needs to be transferred from the investment entities to the Government.