Issuing limits for Singapore government securities, Treasury bills raised to S$1.5 trillion

SINGAPORE: The government will be able to raise more money through government securities and Treasury bills (T-bills), after a motion was passed in parliament on Tuesday (Nov 12).

Lawmakers approved an increase of S$450 billion (US$337 billion), bringing the new limit for the issuance of such securities to S$1.515 trillion. This cap is expected to last until 2029.

More than 60 per cent of the increase is expected to come from the issuance of Special Singapore Government Securities, which are government bonds issued to the Central Provident Fund (CPF) Board.

CPF funds are used to invest in these special securities that are fully guaranteed by the government, and earn a coupon rate that is pegged to the interest rates that CPF members receive.

The Ministry of Finance (MOF) said this provides assurance that the CPF Board will be able to pay its members. 

Second Minister for Finance Chee Hong Tat said CPF balances are expected to continue increasing over the next five years as a result of growing wages and policy enhancements. He noted that the median gross monthly income from employment grew by 3.2 per cent per year between 2018 and 2023.

Meanwhile, changing policies such as higher CPF contribution rates for senior workers will increase CPF's investment needs, requiring more issuance of Special Singapore Government Securities.

The rest of the increase in the limit will be for projected issuances of T-bills, Singapore Savings Bonds and Singapore Government Securities (Market Development).

These are issued mainly to support the continued development of a vibrant Singapore Government Securities market. MOF said the market serves as an anchor for the growth of the corporate and retail debt market.

They are also issued to meet demand for high-quality liquid assets, the ministry said.

The limit was last raised to S$1.065 trillion in 2021, and the government expects issuances to reach that limit in 2025. 

Mr Chee said that the outstanding amount of government securities and T-bills issued under the Government Securities (Debt Market and Investment) Act was S$955 billion as of end-October this year.

Member of Parliament Jamus Lim (WP-Sengkang) raised questions about the size of the increase, which is larger than that of previous increases.

He also asked how the government it will limit the fiscal impact of interest repayments, which are higher now than they were in 2021, and if the issuance of such debt has translated into "actual, usable, investable" funds for companies in Singapore.

In response, Mr Chee said the increase is in line with historical trends and comparable with the last time the limit was raised in terms of percentage. He added that Singapore's debt is fully backed by assets, and the country can borrow on more favourable terms.

In terms of impact on Singapore, Mr Chee noted that the financial sector is a key provider of jobs for Singaporeans.

RAISING LIMIT DOES NOT AFFECT FISCAL POSITION

He also said that proceeds from the issuance of these securities are invested, and are not used to fund government spending.

"The government does not borrow for recurrent spending needs, so as not to overly burden our future generations who will have to service the debt incurred by current and previous generations," he said.

The increase in the limit is not for spending purposes and does not impact the government's fiscal position.

While other countries borrow to fund recurrent spending, Singapore only borrows to fund nationally significant infrastructure projects under the Significant Infrastructure Government Loan Act (SINGA).

The amount borrowed under SINGA makes up less than 2 per cent of the total amount the government borrows, and SINGA has a separate borrowing limit. 

Mr Chee added that Singapore's gross debt-to-GDP ratio may appear large, but it does not fully reflect the country's financial position as it does not consider Singapore's assets, which outweigh its debts.