Speech By Mrs Josephine Teo, Minister Of State For Finance And Transport, For Moving A Motion To Increase The Issuance Limit Under The Government Securities Act, at The Parliament, 9 Apr 2012

Mr Speaker, Sir, I beg to move,

“That this Parliament, in accordance with Article 144(1)(a) of the Constitution of the Republic of Singapore and Section 11(1) of the Government Securities Act (Chapter 121A of the 2002 Revised Edition), resolves that the Minister for Finance be authorised to borrow, by the issue of Government Securities in Singapore under that Act, a further sum not exceeding One Hundred and Seventy Thousand Million Singapore Dollars (S$170,000,000,000), thereby in total a sum not exceeding Four Hundred and Ninety Thousand Million Singapore Dollars (S$490,000,000,000).”

Background

2. Sir, the Government Securities Act was set up in 1992 to provide for the issuance of Government securities in Singapore. We issue securities not for spending, but to fulfill other specific purposes: Singapore Government Securities are issued to develop the domestic debt market, while Special Singapore Government Securities are non-tradable bonds issued specifically to meet the investment needs of the Central Provident Fund. As the proceeds from the issuance of securities are not spent, they are invested.

3. There is a limit on the amount of securities Government can issue, and this limit is authorised by Parliament. The last increase in the issuance limit was in November 2009, when Parliament approved the increase of Government’s issuance limit from $250b (Two Hundred and Fifty Billion Dollars) to $320b (Three Hundred and Twenty Billion Dollars).

4. As at the end of 2011, the outstanding amount of securities is $295b (Two Hundred and Ninety Five Billion Dollars), and this amount is estimated to reach $490b (Four Hundred and Ninety Billion Dollars) in five years time. There is therefore a need to raise the limit now.

Need to Increase Issuance of Government Securities

5. About eighty percent of the increase is expected to be issued to CPF Board to meet its investment needs. The needs of CPF Board are expected to increase due to growth in the resident labour force and wages, as well as the increasing accumulation of CPF balances.

6. The remaining twenty percent of the increase would be for MAS to increase the issuance of Singapore Government Securities in line with the growth of our financial markets, and to enhance the efficiency and liquidity of Singapore’s debt markets in particular.

7. As Members would know, all proceeds from the issuance of securities by the Singapore Government are invested. Unlike other countries, none of these borrowings are spent. We operate on a balanced budget, and under our Protection of Reserves Framework, a Government can only spend the reserves accumulated during its term.

8. I propose, therefore, that the ceiling for issuing Government securities be raised by $170b (One Hundred and Seventy Billion Dollars), to $490b (Four Hundred and Ninety Billion Dollars). The proposed limit of $490b (Four Hundred and Ninety Billion Dollars) will apply to the outstanding amount of Government securities, and is expected to last us till 2017.

9. Sir, I beg to move.