Singapore—In Parliament on Tuesday (Jan 5), Leong Mun Wai, Non Constituency Member of Parliament (NCMP) from the Progress Singapore Party (PSP) made a speech supporting the motion for the increase of borrowing limits.
Mr Leong said that this is for the purpose of debt financing to cover long-term development projects and contingencies. He also urged the Government to expand its financial management tools “while keeping tight fiscal discipline to achieve better financial efficiency.”
The NCMP, who has worked with global investment banks in Tokyo, London, and Hong Kong over the course of his career and served as the Managing Director of OCBC Securities, noted that over the past 20 years, increases in borrowing limits have been regularly sought.
The last time this was done was in 2016 when the Government Securities’ limit was raised by S$200 billion to S$690 billion.
He added that by March of last year, the total combined insurance of Government Securities and Treasury Bills had reached S$670 billion, while the limit had been capped at S$750 billion.
“Hence the need to increase the limit,” he said.
The proposed limit increase for Government Securities is S$270 billion, while for Treasury Bills it is S$45 billion, which would bring the combined borrowing limit to S$1.065 trillion.
Mr Long added, “However, these borrowings are actually not spent but managed and re-invested by the Government of Singapore Investment Corporation (GIC) and the Monetary Authority of Singapore (MAS).”
The NCMP further explained that Singapore has had Budget surpluses since 1968, with the exception of only a few years, due to “profitable land sales, steady economic growth, high domestic savings through the CPF scheme and seignorage from the Singapore dollar.”
As of March of last year, Singapore had amassed S$1.35 trillion in financial assets, and now “enjoys the coveted Triple A Sovereign Credit Rating”.
Mr Leong also proposed a new borrowing limit which he suggested could be called the Development and Contingency Limit (DC Limit). This would allow for “more flexibility in fiscal management and to take advantage of the historically low-interest rates” but would be separate from current borrowing limits.
He outlined the advantages of using debt prudently, including “temporary bridge financing” in such urgent situations as the Covid-19 pandemic.
The PSP NCMP also touched on the Goods and Services Tax (GST) saying that Singapore “should not give the impression that the GST is the only source” of tax revenues.
At the end of his speech, he said: “I urge the Government to make use of the post-Covid year of 2021 as a starting point to review our fiscal policies, strategies, and processes, to achieve greater financial efficiency for building a stronger financial foundation, both on the macro and micro level.
“If the Government believes that this is a new normal, then old policies or the extension of them will no longer be the answer to the future.”
Mr Leong’s speech may be viewed here.
Later, on that same day, the motion was approved.
Lawrence Wong, who is the Second Minister for Finance, had also emphasized before the approval of the motion that these borrowings are invested and do not raise the funds made available to the Government for spending.
Mr Wong added that he expects that the greater part of the rise in government securities by the end of 2025 would be issued to the CPF (Central Provident Fund) to meet investment needs, saying, “We expect CPF balances to increase due to growth in the resident labour force and wages.”