GOVERNMENT SECURITIES BILL

Order for Second Reading read.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, I beg to move, "That the Bill be now read a Second time."

The Bill seeks to create a Government Securities Fund which would be used to account for all future loan proceeds raised through the issue of Government securities, other than those for financing development projects.

Under the present system, Government's domestic borrowings are all carried out under the Development Loan Act through the issue of Government securities. These borrowings, mainly from the Central Provident Fund (CPF) Board, are credited to the Development Fund and used to finance Government's development expenditure.

The moneys standing to the credit of the Development Fund are invested, with the income credited back to the Fund. The investment income attributable to the Fund is sufficient to meet debt servicing charges. However, under current legal and accounting arrangements, the debt servicing on these borrowings must be charged to the Consolidated Fund. This arrangement has created unnecessary demands on the Consolidated Fund.

The volume of domestic borrowings has been maintained over the years. But not all the proceeds were needed to finance Government development expenditure. This is because a substantial portion of such expenditure has been funded through annual operating surpluses. This has led to a build-up in the Development Fund, as the moneys in the Fund can only be used for development expenditure and cannot be used for any other purpose.

In addition, when the Government Securities Market was launched, the proceeds from the issue of Government securities were similarly channelled to the Development Fund while the debt servicing costs were charged to the Consolidated Fund.

To resolve these problems, it is necessary to rationalise the accounting treatment of future Government borrowings from the CPF Board and the Government Securities Market. In this regard, it is proposed that a Government Securities Fund be created to account for all future borrowings, other than those for financing development projects, raised through the issue of Government securities. Following the current practice, the Monetary Authority of Singapore will be authorised to act as the agent of the Minister for Finance in raising loans through the issue of Government securities.

The proceeds from the issue of Government securities will be credited to the Government Securities Fund. The moneys standing to the credit of the Fund will be invested and the resultant income used to meet the debt servicing cost and other related expenditure of the Fund.

There will be a safeguard whereby any deficiency in the Government Securities Fund will be met from the Consolidated Fund. This will ensure that loans raised under the Government Securities Fund will be as secure as those raised under the Development Loan Act.

In the event that it is necessary in the future for Government to borrow in order to finance new development projects, the borrowing will continue to be carried out under future authorisation in the Development Loan Act and not under the Government Securities Fund.

Among other things, the Bill also provides for the following:

(a) The requirement of a parliamentary resolution for the maximum amount which the Government could borrow through the issue of Government securities.

(b) The accounting requirements for the loan proceeds, investment income, debt servicing charges and other related expen-ses.

(c) The procedures relating to the payment of interest, redemption of Government securities and the creation of a sinking fund.

(d) The prescription of regulations setting out the terms of issue of Government securities.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau].

Bill considered in Committee; reported without amendment; read a Third time and passed.