SINGAPORE DOLLAR (Internationalisation)

Mr Ang Nam Piau asked the Minister for Finance when the Government will make the Singapore dollar an international currency and if he will state the advantages and disadvantages of the Singapore dollar becoming an international currency.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, the Singapore dollar has traditionally been used to finance some of our entrepot and regional trade. There are no restrictions on the use, or international use if you like, of our currency for this purpose. At the same time, there has also been no official encouragement for the wider use of our currency. It is not my intention to encourage such use.

If by "internationalisation", the hon. Member means also the use of the Singapore dollar as a reserve currency, I have to say that, like many more developed countries such as Germany and Japan, this will not be welcomed.

The wider use of the Singapore dollar will lead to the further growth of our foreign exchange, money and capital markets. It will also lead to increased use of local banking facilities.

The disadvantage of internationalisation is that it could give rise to large destabilising flows into and out of the Singapore dollar. The resulting swings in the exchange rate of the dollar would cause some disruption in trade. Such currency flows would also render the control of the money supply more difficult.