Speech by Ms Indranee Rajah, Senior Minister of State for Law and Finance, for Moving a Motion to Increase the Issuance Limit under the Government Securities Act

Mdm Speaker, 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 2014 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 Two Hundred Thousand Million Singapore Dollars (S$200,000,000,000), thereby in total a sum not exceeding Six Hundred and Ninety Thousand Million Singapore Dollars (S$690,000,000,000).”

Background

2. Mdm, the Government Securities Act was set up in 1992 to provide for the issuance of government securities in Singapore. The securities are issued not for government spending, but to fulfill other specific purposes: Singapore Government Securities (SGS) are issued to develop the domestic debt market; the Special Singapore Government Securities (SSGS) are non-tradable bonds issued primarily to meet the investment needs of the Central Provident Fund (CPF) and the Singapore Savings Bonds (SSB) are issued to provide individual investors with long-term savings option. The proceeds from the issuance of securities are not spent; they are invested.

3. There is a limit on the amount of securities the Government can issue, and this limit is authorised by Parliament. The last increase in the issuance limit was in April 2012, when Parliament approved the increase of the Government’s issuance limit from S$320b (Three Hundred and Twenty Billion Singapore Dollars) to S$490b (Four Hundred and Ninety Billion Singapore Dollars).  The approved increase was projected to serve the issuance needs of the Government for 5 years till 2017.

4. As at March 2016, the outstanding amount of securities is S$429b (Four Hundred and Twenty-Nine Billion Singapore Dollars), and we are on track to fully utilize the current limit by end of 2017. There is therefore a need to raise the limit to cater to the issuance needs for Government securities for the next 5 years beyond 2017.

Need to Increase Issuance of Government Securities

5. The outstanding amount of securities is projected to reach S$690b (Six Hundred and Ninety Billion Singapore Dollars) by the end of 2022. About eighty four percent of the increase is expected to be issued to CPF Board to meet its investment needs. We expect CPF balances to continue to increase due to growth in the resident labour force and wages, various government transfers, and CPF policy enhancements.

6. The remaining sixteen percent of the increase would be primarily for MAS to increase the issuance of the SGS in line with the growth of our financial markets to enhance the efficiency and liquidity of Singapore’s debt markets in particular, and the issuance of the SSB to individual investors.

7. The increase in issuance limit for government securities has no impact on Government’s fiscal position. All the borrowings will be invested and not spent. Under the Protection of Reserves Framework in the Constitution, Government will continue to have to operate on a balanced budget and can only spend the reserves accumulated during its term.

8. I propose, therefore, that the ceiling for issuing government securities be raised by S$200b (Two Hundred Billion Singapore Dollars), to S$690b (Six Hundred and Ninety Billion Singapore Dollars). The proposed limit of S$690b (Six Hundred and Ninety Billion Singapore Dollars) will apply to the outstanding amount of Government Securities, and is expected to last us 5 years till 2022.  

9. Mdm, I beg to move.