GOVERNMENT SECURITIES

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I beg to move,

That this Parliament, in accordance with Section 11(1) of the Government Securities Act (Chapter 121A, 1993 Revised Edition), resolves that the Minister for Finance be authorised to borrow, by the issue of Government Securities in Singapore, a further sum not exceeding one hundred and twenty thousand million Singapore dollars (S$120,000,000,000), thereby in total a sum not exceeding two hundred and twenty thousand million Singapore dollars (S$220,000,000,000).

Sir, on 19th March 1992, Parliament resolved, in accordance with section 11(1) of the Government Securities Act 1992, that the Minister be authorised to borrow, by the issue of Government securities in Singapore, a sum not exceeding S$100,000 million. Presently, there remains only about S$2,100 million of Government securities left unissued. The Monetary Authority of Singapore expects to exhaust that remaining amount in the next few months.

It is estimated that S$120,000 million in Singapore Government securities would have to be issued over the next five to eight years. The proposed higher limit for issuing of Government securities is part of an overall strategy to develop the Singapore Government Securities (SGS) market as a foundation for the growth of Singapore's capital market, and to realise our vision of becoming a leading international debt hub in Asia by FY 2003. An estimated 65% or S$78,000 million of the Government securities will be issued to the CPF Board. The remaining 35% or S$42,000 million of Government securities will be issued to enable financial institutions such as banks, finance companies and insurance companies to meet requirements for liquid assets, and to meet the demand from financial institutions, fund managers and others for investment purposes.

The planned increase in supply of Singapore Government securities over the next five years or more will increase the availability of Singapore Government bonds to add liquidity and depth to the market, and help to establish a benchmark Singapore Government bond yield curve for the pricing of other bond and capital market instruments. A more vibrant capital market in Singapore with a larger pool of fixed income origination and trading skills, diversity of borrowers and a broader investor base, will enhance Singapore's status as a financial centre. There will be spin-off benefits through increased activities in the foreign exchange, swap, repurchase and derivative markets.

With the increase in issues of Singapore Government securities to both the general market and CPF Board, it is estimated that the annual debt servicing costs on outstanding Singapore Government bonds will increase from about S$3,000 million per year currently, to about S$5,300 million per year in FY 2003. However, the earnings from foreign reserves acquired, when the S$ funds withdrawn through issue of Government securities are recycled back to the market, are expected to more than offset this interest cost.

The authority of Parliament is therefore sought to raise the ceiling for borrowing through the issue of Government securities by a further sum of S$120,000 million. This will increase the ceiling from the current S$100,000 million to a total of S$220,000 million. This ceiling is applicable to the cumulative total of all Government securities issued, regardless of whether they have been redeemed or are still outstanding.

Question put, and agreed to.

Resolved,

That this Parliament, in accordance with Section 11(1) of the Government Securities Act (Chapter 121A, 1993 Revised Edition), resolves that the Minister for Finance be authorised to borrow, by the issue of Government Securities in Singapore, a further sum not exceeding one hundred and twenty thousand million Singapore dollars (S$120,000,000,000), thereby in total a sum not exceeding two hundred and twenty thousand million Singapore dollars (S$220,000,000,000).

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.25 pm.

Sitting accordingly suspended at 3.05 pm until 3.25 pm. Sitting resumed at 3.25 pm