Government Securities

6.30 pm

Mrs Josephine Teo: Mr Speaker, Sir, I beg to move,

That this Parliament, in accordance with Article 144(1)(a) of the Constitution of the Republic of Singapore and section 11(1) of the Government Securities Act (Chapter 121A of the 2002 Revised Edition), resolves that the Minister for Finance be authorised to borrow, by the issue of Government Securities in Singapore under that Act, a further sum not exceeding One Hundred and Seventy Thousand Million Singapore Dollars (S$170,000,000,000), thereby in total a sum not exceeding Four Hundred and Ninety Thousand Million Singapore Dollars (S$490,000,000,000).

Sir, the Government Securities Act was set up in 1992 to provide for the issuance of Government securities in Singapore. We issue securities not for spending, but to fulfil other specific purposes: Singapore Government Securities are issued to develop the Singapore debt market, while Special Singapore Government Securities are non-tradable bonds issued specifically to meet the investment needs of the Central Provident Fund. As the proceeds from the issuance of securities are not spent, they are invested.

There is a limit on the amount of securities Government can issue, and this limit is authorised by Parliament. The last increase in the issuance limit was in November 2009, when Parliament approved the increase of Government's issuance limit from $250 billion to $320 billion. As at the end of 2011, the outstanding amount of securities is $295 billion, and this amount is estimated to reach $490 billion in five years' time. There is, therefore, a need to raise the limit now.

About 80% of the increase is expected to be issued to the CPF Board to meet its investment needs. The needs of CPF Board are expected to increase due to growth in the resident labour force and wages, as well as the increasing accumulation of CPF balances.

The remaining 20% of the increase would be for the Monetary Authority of Singapore (MAS) to increase the issuance of Singapore Government Securities in line with the growth of our financial markets, and to enhance the efficiency and liquidity of Singapore's debt markets in particular.

As Members would know, all proceeds from the issuance of securities by the Singapore Government are invested. Unlike other countries, none of these borrowings are spent. We operate on a balanced budget, and under our Protection of Reserves Framework, a Government can only spend the reserves accumulated during its term.

I propose, therefore, that the ceiling for issuing Government securities be raised by $170 billion, to $490 billion. The proposed limit of $490 billion will apply to the outstanding amount of Government securities, and is expected to last us till 2017. Sir, I beg to move.

6.35 pm

Page: 78

Mr Chen Show Mao (Aljunied): A clarification, Sir. When Parliament approved the last increase in the borrowing limit two-and-a-half-years ago, it was estimated that the increase of $70 billion would be sufficient to last a period of five years, taking into account the expected increase in CPF funds as a result of changes in policies such as CPF LIFE and the increase in Minimum Sum, as well as the expected growth in the market for Singapore Government Securities over a period of five years. So I would like to ask the Minister of State what new and additional considerations now necessitate this substantial increase of $170 billion to the borrowing limit − how did the Ministry arrive at this number of an additional $170 billion?

6.36 pm

Mrs Josephine Teo: Sir, I thank Mr Chen for his question. Mr Chen will recall that in 2009, it was a period of great uncertainty and we were in the depths of a recession. As it turned out, at the end of 2009, actually Singapore did remarkably well. We registered a growth of nearly 2%. The rebound in 2010 was even faster and stronger than anyone had hoped for. Our Resilience Package had not only served its purpose, it exceeded all expectations. So the rebound was very strong. So in 2009, when we made those projections, it was with a certain set of economic conditions in mind, it was with a certain expected growth in CPF balances which soaks up quite a large part of the issuance of these Government Securities.

In summary, what has happened in that time was that the increase in the Special Singapore Government Securities was faster than expected as the economy recovered very rapidly and exceeding expectations. As a result, the issuance limit that we sought in 2009 is going to be reached much earlier than we expected. So this is why we have come to Parliament again to ask for the issuance limit to be raised.

Question put, and agreed to.