SINGAPORE'S FOREIGN CURRENCY RESERVES (Conversion into gold)

Mr Ng Kah Ting asked the Minister for Finance (a) whether it is feasible to convert most of Singapore's foreign currency reserves into gold, since the Republic's currency is backed by 100 per cent gold; and (b) what steps he is taking or will take to protect the Singapore dollar against any eventual loss.

Mr Tang See Chim (for the Minister for Finance): Mr Govindasamy, Sir, part (b) of this question has been answered already. With regard to part (a) of the question, the Member for Punggol is probably aware that the official price of gold as against the free market price of gold has remained at U.S. $35 per ounce for over 30 years. It was, however, difficult in the past, and impossible now that the United States has closed the "window" for converting the U.S, dollar into gold, to buy gold at this price. Even if gold can be so acquired, there is some disadvantage in holding most of Singapore's external reserves in gold. Gold stored in vaults does not earn any income - and in fact storage and security costs are incurred. Nevertheless, we do believe that we should hold some part of our reserves in gold. It is not correct in saying that the Singapore dollar is backed 100 per cent by gold. Our currency backing is in the form of gold and in foreign exchange reserves, and these reserves have enabled the Currency Board to earn over SS21 million for the year ended 31st December, 1970. As long as a policy of diversification is pursued and we respond quickly to world monetary trends, it is not necessary to hold all of Singapore's assets in gold.

Mr Ng Kah Ting: Mr Govindasamy, Sir, can the Minister of State for Finance enlighten this House with more details and state the total amount of Singapore's foreign currency reserves?

Mr Tang See Chim: Sir, I think the Member is referring to our total reserves and not just our currency backing in foreign assets. The total of our foreign assets exceeds S$3,800 million. Just over 40 per cent of this is in the form of Sterling assets, while the balance is composed of gold and various other holdings denominated in U.S, dollars, German marks, Japanese yen and Swiss francs, etc.