SUBSCRIPTION IN INTERNATIONAL MONETARY FUND

4.15 p.m.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, I beg to move,

That this Parliament, pursuant to paragraph (c) of subsection (1) of section 3 of the Bretton Woods Agreements Act (Chapter 61), resolves that the Minister for Finance be authorised to increase, on behalf of the Government, the total subscription of Singapore in the International Monetary Fund to a sum equivalent to 49 million Special Drawing Rights.

Sir, the Board of Governors of the International Monetary Fund has adopted a Resolution on Increases in Quota of Fund members - Sixth General Review, under which there will be an overall increase in the Fund's quotas not exceeding 32.5% of the total quotas as of 19th February 1976.

Quota reviews are conducted by the International Monetary Fund at intervals of approximately five years so that adjustments can be made in members' quotas to reflect changes in their relative economic strength. An important feature of a member's quota is that it determines the scope of a member's access to the resources of the Fund when in balance of payments difficulties and a member's obligations to lend to the Fund on concessionary terms when its balance of payments position is strong.

At present Singapore's quota in the International Monetary Fund is 37 million Special Drawing Rights. This is equivalent to US$45.4 million, based on exchange rates at the end of February 1978.

Parliament is requested to authorise the Government to increase Singapore's quota in the International Monetary Fund by a sum of twelve million Special Drawing Rights, equivalent to US$14.7 million, based on exchange rates at the end of February 1978, to a sum not exceeding forty-nine million Special Drawing Rights (SDR 49 million).

Sir, I beg to move.

Question proposed.

Dr Augustine H.H. Tan (Whampoa): Mr Speaker, Sir, sometime ago we read in the newspapers that we had some dispute with the International Monetary Fund in respect of the gold which we had contributed earlier to the Fund. The gold had been sold by the IMF which intends to use the profits for distribution to the poorer countries as a form of economic aid. May I ask the Hon. Minister whether the matter has now been resolved and in what direction?

I have also a further question in regard to the Special Drawing Rights scheme of the International Monetary Fund. As I understand it, Singapore has not become a member of this scheme. May I ask the Hon. Minister whether the matter has been reconsidered and if we are still not a member, why not?

Mr Hon Sui Sen: Sir, in answer to the Member's first question on Singapore's share of the gold profits which IMF has made in disposing of part of the gold which they hold, the matter has not yet been resolved. We have had a visit from the IMF team to study the conditions of Singapore's economy, the expatriate element in our economy and therefore the national element in our gross national product, as to whether we fall below the criteria which have been suggested by the IMF. I think the visit has been fruitful. I think we have been able to convince the team that we fall below the dividing line between what they consider would be developing countries and developed countries. We are hopeful that when the matter is reported to the Board of the International Monetary Fund we shall succeed in establishing that we should be entitled to our share of the gold profits.

In regard to the question on Special Drawing Rights, the position is still the same, that is, Singapore has not subscribed to that scheme and there is still no intention of subscribing to the scheme.

Dr Augustine Tan: Mr Speaker, Sir, we are a member of the IMF but it seems to me rather curious that we are staying out of this scheme of the IMF, which hon. Members may be aware, is a scheme to increase international liquidity by the issue of this so-called Special Drawing Rights, that is, from time to time the members of the scheme get together and the IMF decides to issue so many millions of Special Drawing Rights in accordance with some formula related to trade and size of GNP and so forth. It seems to me that this kind of allocation has a cumulative effect and that by staying out of the scheme we may be losing out in terms of access to international liquidity or credit which may be useful in the future in case we do get into some balance of payments difficulties.

I do realise that there is a cost involved in joining the scheme. The cost is in respect of two factors. One is that the interest payable on the scheme has been low in relation to the market rates of interest so that any fund diverted from, say, normal holdings of foreign exchange reserves to the IMF for the purpose of use by other members under the scheme would incur a loss of interest. The other factor is that since we are a surplus country in respect of balance of payments position we would be designated as contributor to the SDR scheme in respect of hard currencies for the use of members who are in a deficit position. Perhaps the Hon. Minister might want to inform the House what his calculations are in this respect.

Mr Hon Sui Sen: Mr Speaker, Sir, I do not think this is the appropriate time to go into the whole question of the Special Drawing Rights. The Ministry of Finance has a very thick file on this. We have had the benefit of consultations with a number of people. We have not been convinced of the benefits of joining the SDR scheme.

It is not to be regarded in the same way as other currencies. In fact, it is quite clear that the interest rate, which the Member has mentioned, which is paid on the SDR's which are borrowed, is rather too low. There is a proposal to increase such interest rate but until the SDR is very much improved I think our position should remain the same. There is no reason why we should join that scheme until we are in danger of being faced with balance of payments problems. I hope we will never come to that situation.

The conclusion which we have come to and which we still maintain is that there is no benefit to Singapore in joining the Special Drawing Rights scheme. But if he would like to have more information on this, perhaps he could ask a Question and I would be prepared to make a fairly lengthy statement on this matter which I do not think would be of the same interest to non-economist Members of the House.

Question put, and agreed to.

Resolved,

That this Parliament, pursuant to paragraph (c) of subsection (1) of section 3 of the Bretton Woods Agreements Act (Chapter 61), resolves that the Minister for Finance be authorised to increase, on behalf of the Government, the total subscription of Singapore in the International Monetary Fund to a sum equivalent to 49 million Special Drawing Rights.