Why don't we spend the proceeds from selling land?
Land is scarce in Singapore, and it is our main natural resource. It is thus protected as part of the reserves. When the Government sells land, it does not create new wealth ? it merely converts the physical asset into a financial asset. When land is converted into a financial asset, the financial asset remains part of Past Reserves and cannot be used for expenditure. Spending the proceeds from selling land is simply akin to using up more of the reserves. Instead, the Government invests the land sales proceeds with the rest of the reserves, and spends up to 50% of the returns through the NIR framework. This provides a more stable and sustainable stream of income over time than directly spending the land sales proceeds. a. First, land prices move in cycles and can be volatile. This would cause Government revenues to fluctuate with the market, creating too much uncertainty for the Government to plan for the long term. b. Second, when a government relies on land sales to fund spending, it could develop a vested interest in keeping land prices high to maximise revenues.
Let other citizens know if this answer was helpfulDid this answer your question?
Can’t find what you’re looking for?