Speech by Second Minister for Finance, and Minister for Education, Mr Lawrence Wong for Moving Motions to Increase the Issuance Limits under the Government Securities Act and Local Treasury Bills Act

GOVERNMENT SECURITIES

(Motion)

Madam Deputy 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 and Seventy Thousand Million Singapore Dollars (S$270,000,000,000), thereby in total a sum not exceeding Nine Hundred and Sixty Thousand Million Singapore Dollars (S$960,000,000,000).”

2. I will also move a separate motion to increase the borrowing limit under the Local Treasury Bills Act. Madam, may I therefore propose, with your permission, that the substantive debate on both motions take place now. So, I would invite members to express their views or raise questions on both motions during the debate. We will still move and take the Treasury Bills motion separately to ensure that the procedural requirements are dealt with. However, this proposal to have the substantive debate for both motions taking place now, will allow the substantive arguments to be captured cogently in a single debate. 

3. Let me explain why there is a need to increase both borrowing limits.  

Background

4. Madam, the Government Securities Act, or the GSA, authorises the issuance of Government Securities in Singapore. These securities are issued not for government spending. They are to fulfil other purposes. Specifically:

(a) the Singapore Government Securities (SGS) are issued to develop the domestic debt market and provide financial institutions with high quality liquid assets to meet regulatory requirements; 

(b) the Special Singapore Government Securities, or SSGS, are non-tradable bonds issued primarily to meet the investment needs of the Central Provident Fund (CPF); and 

(c) the Singapore Savings Bonds (SSB) are issued to provide individual investors with a long-term savings option. 

5. Separately, the Local Treasury Bills Act, or the LTBA, authorises the issuance of Treasury Bills, to develop the domestic short-term debt market and to meet market demand for short-term rated Singapore Government debt securities. 

6. Madam, let me emphasise again that these borrowings under both the GSA and the LTBA are invested, and do not increase the amount available for government spending. So, the increases in the respective borrowing limits do not improve the Government’s fiscal position. 

7. Both the GSA and the LTBA provide for limits on the amounts that can be borrowed through the issuance of Government Securities and Treasury Bills respectively. These limits are authorised by Parliament. 

(a) For the GSA, the last increase for the issuance limit took place in 2016, when Parliament approved the increase of the Government’s issuance limit from S$490b (Four Hundred and Ninety Billion Singapore Dollars) to S$690b (Six Hundred and Ninety Billion Singapore Dollars). Currently, the outstanding amount of securities issued under the GSA is S$642b (Six Hundred and Forty-Two Billion Singapore Dollars).

(b) For the LTBA, the last increase for the issuance limit took place in 2007, when Parliament approved the increase of the Government’s issuance limit from S$30b (Thirty Billion Singapore Dollars) to S$60b (Sixty Billion Singapore Dollars). Currently, the outstanding amount of securities issued under the LTBA is S$60b (Sixty Billion Singapore Dollars).

8. So, the Government has fully utilised the prevailing LTBA limit, and we expect to utilise the prevailing GSA limit before mid this year. There is therefore a need to raise these limits, to cater to the growth in demand for Government Securities and Treasury Bills expected over the next five years. 

Need to Increase Issuance of Government Securities under the GSA and Treasury Bills under the LTBA

9. Under the GSA, we project that the outstanding amount of securities will reach S$960b (Nine Hundred and Sixty Billion Singapore Dollars), by the end of 2025. About seventy four percent of this increase is expected to be issued to the CPF as SSGS. In other words, we issue this to CPF as Special Singapore Government Securities to meet its investment needs. The coupon rates which the SSGS earn for the CPF Board match the interest rates that the CPF members receive. We expect CPF balances to increase due to growth in the resident labour force and wages. For example, the resident labour force grew by an average of 1.0% per year from 2015 to 2020. Over the same period, nominal median gross monthly income from work of full-time employed residents grew by 2.8% per year. Upcoming CPF policy enhancements, like the higher CPF contribution rates for older workers will also increase CPF’s investment needs in the coming years. So, that is for the seventy four percent.

10. The remaining twenty six percent of the increase under the GSA will be for issuance of SGS. This is to support the continued development of a vibrant SGS market, that serves as an anchor for the growth of corporate debt market, and to meet the increased demand for high quality liquid assets from financial institutions in tandem with the growth of our financial markets.  

11. Like SGS, we have seen an increase in demand for Treasury Bills from investors. These are shorter in tenure. Issuing more Treasury Bills will help meet market demand for high quality short-term Singapore dollar denominated papers. 

12. We will continue to monitor the market demand for both Government Securities and Treasury Bills, and will increase the rate of issuance to meet this demand, if necessary. 

Introduction of Cash Management Treasury Bills under the LTBA

13. The Government will also put in place a new short-term cash management tool, where Treasury Bills can be issued on an ad-hoc basis to meet temporary cashflow mismatches. The Government strives to maintain a healthy level of Government Deposits with MAS and has a variety of cashflow sources, like tax revenue and land sales to meet our liquidity needs for day-to-day operations. The introduction of this new tool is part of the Government’s ongoing efforts to expand our cash management toolkit and will provide more operational flexibility to raise cash quickly, should any short-term cashflow mismatches occur in future. 

14. Issuing ad-hoc short-term bills for cash management is not a new concept, as countries from around the world like Sweden have similar cash management bills programme to meet their Government’s temporary cashflow mismatches.

15. Such temporary cashflow mismatches may occur from time to time as we seek to optimise government’s treasury and liquidity management, and minimise the excess cash holdings in the Government’s balance sheet. Cashflow mismatches can occur when there are unanticipated delays in cash inflow, which may coincide with an earlier-than-expected cash outflow. When this occurs, we would address this by tapping on our liquidity buffers. It is therefore important for Government to have diversified sources of liquidity for better risk management and the ability to issue ad-hoc Treasury Bills when needed, would provide the Government with greater operational flexibility to manage our liquidity needs. 

16. To distinguish this from the regular Treasury Bills, the ad-hoc Treasury Bills will be called “Cash Management Treasury Bills”, or CMTB in short. The tenor of CMTB will be tailored to meet the period of need and will be less than six months as it will be issued solely for short-term cashflow management.

17. I should emphasise that issuing CMTB will only expand our cash management toolkit. Again, it does not increase our fiscal budget available for spending.

18. The maximum size of the CMTB is envisaged to be no larger than S$10b (Ten Billion Singapore Dollars), which has been accounted for under the proposed increase in the LTBA borrowing limit.

Conclusion

19. The increases in the borrowing limits are for specific market development and operational needs purposes, and not to cover the Government’s fiscal shortfall. Any increase in the Government borrowings under the GSA and LTBA will correspondingly increase the Government’s cash and liabilities but will not increase the Government’s fiscal budget for spending. 

20. For the present motion, I propose to raise the ceiling for issuing Government Securities under the Government Securities Act by S$270b (Two Hundred and Seventy Billion Singapore Dollars), to S$960b (Nine Hundred and Sixty Billion Singapore Dollars). The proposed limit of S$960b (Nine Hundred and Sixty Billion Singapore Dollars) will apply to the outstanding amount of Government Securities and is expected to last for five years till 2025.   

21. Madam, I beg to move.

TREASURY BILLS

(Motion)

Madam Deputy 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 3(1) of the Local Treasury Bills Act (Chapter 167 of the 2002 Revised Edition), resolves that the Minister for Finance be authorised to borrow, by the issue of Treasury Bills in Singapore under that Act, a further sum not exceeding Forty-Five Thousand Million Singapore Dollars (S$45,000,000,000), thereby in total a sum not exceeding One Hundred and Five Thousand Million Singapore Dollars (S$105,000,000,000).”

2. Madam, I have earlier explained the rationale behind the need to increase the borrowing limit under the Local Treasury Bills Act, during the motion to increase the borrowing limit under the Government Securities Act. 

3. So, for this motion, I propose to raise the ceiling for issuing Treasury Bills under the Local Treasury Bills Act by S$45b (Forty-Five Billion Singapore Dollars), to S$105b (One Hundred and Five Billion Singapore Dollars). The proposed limit of S$105b (One Hundred and Five Billion Singapore Dollars) will apply to the outstanding amount of Treasury Bills and is expected to last for five years till 2025.