Legislation on government borrowings consolidated in new law
The Government can borrow up to $90 million to pay for infrastructure that will last for at least 50 years under the Significant Infrastructure Government Loan Act.
A law that brings together various pieces of legislation on government borrowings was passed in Parliament yesterday, with Finance Minister Lawrence Wong saying the largely administrative move will provide greater clarity on the Government's debt profile.
The Government Borrowing (Miscellaneous Amendments) Bill merges the existing Local Treasury Bills Act (LTBA) and Government Securities Act (GSA), the laws under which the majority of government borrowings are raised.
After the two pieces of legislation are merged, the Government Securities Act will be renamed the Government Securities (Debt Market and Investment) Act, and the existing LTBA will be repealed.
The renamed GSA will continue to provide for the Government to borrow for specific, non-spending purposes, such as market development and meeting the investment needs of the Central Provident Fund.
This will be done through the issuing of Treasury bills or longer-term securities such as the Singapore Government Securities.
Wrapping up the debate on the Bill, Mr Wong said the majority of Singapore's borrowings will continue to be issued this way under the renamed GSA, and emphasised that such borrowings cannot be spent by the Government.
"Therefore, such borrowings do not lead to additional debt burdens," he added.
In May, Parliament approved the Significant Infrastructure Government Loan Act, or Singa, paving the way for the Government to borrow for the financing of long-term projects, something that had not been done since the 1990s.
Under Singa, the Government can borrow up to $90 billion to pay for infrastructure that will last for at least 50 years.
Mr Wong said: "With the introduction of Singa, we thought that it would be timely to consolidate legislation of government borrowings for non-spending purposes so as to distinguish these from borrowing for spending purposes under Singa."
He added that borrowings under the renamed GSA will continue to be limited to investment purposes.
The new law will also have a single borrowing limit of $1,065 billion, which is the combined limits of the existing LTBA at $105 billion and GSA at $960 billion.
"There is no change to the overall borrowing limit from today," said Mr Wong.
Mr Louis Ng (Nee Soon GRC) and Associate Professor Jamus Lim (Sengkang GRC) asked if governance can be further strengthened, or if the borrowing limit can be incorporated into the new law.
Mr Wong said the limits are not permanent hard caps and are reviewed periodically, with the Government going back to Parliament when it needs to raise the limits.
"There is really nothing sacrosanct about the borrowing limit," he added, noting that the key legislative safeguard is that none of the borrowings can be spent.
But he said the limit does serve as an additional layer of checks and safeguards, since the Government would have to go back to Parliament to raise it through a parliamentary resolution, and the President would also have to concur before it can take effect.
Mr Liang Eng Hwa (Bukit Panjang) also asked why the borrowing limits of both the existing LTBA and GSA were being merged under the new law, given that the Singapore Government Securities issued under the GSA are of a longer tenure than the Treasury bills issued under the LTBA.
Mr Wong said countries such as the United States and Germany were already managing short-and long-term securities under a single limit, and doing so would give the Monetary Authority of Singapore greater flexibility to calibrate the issuing of securities based on market conditions.
He added that the proportion of short-and long-term securities is not expected to change under the new law.
As at Sept 30, $65 billion worth of securities was under the LTBA and $699 billion under the GSA, he said.
The MAS will continue to publish the breakdown of outstanding Singapore Government Securities and Treasury bills, he added.
Besides the merging of the LTBA and GSA, the new law also repeals the External Loans Act and Treasury Deposit Receipts Act, as well as the borrowing provisions in the Developmental Investment Fund Act, which are no longer necessary, said Mr Wong, adding that there are no outstanding borrowings under these Acts.
He said: "I assure members of this House that our fiscal position remains strong with borrowings. We would review our debt limits regularly to ensure that we continue to borrow within our means and remain in a net asset position."
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