Singapore Parliament approves raise in issuance limits for securities and T-bills to S$1.5 trillion

SINGAPORE: Following the passing of a motion in Parliament on Tuesday (12 November), the government will be able to raise additional funds through government securities and Treasury bills (T-bills). The Parliament approved an increase of S$450 billion (US$337 billion), raising the new issuance limit for these securities to S$1.515 trillion. This cap is expected to remain in place until 2029. Over 60 per cent of the increase will come from the issuance of Special Singapore Government Securities (SSGS), which are government bonds issued to the Central Provident Fund (CPF) Board. CPF funds are invested in these special securities, which are fully guaranteed by the government and offer a coupon rate tied to the interest rates CPF members receive. The Ministry of Finance (MOF) stated that this move ensures the CPF Board can meet its obligations to members. Second Minister for Finance Chee Hong Tat highlighted that CPF balances are projected to continue growing over the next five years, driven by rising wages and policy enhancements. He noted that between 2018 and 2023, the median gross monthly income increased by 3.2 per cent annually. Additionally, changing policies, such as higher CPF contribution rates for senior workers, will raise CPF’s investment needs, thus necessitating the issuance of more Special Singapore Government Securities. The remainder of the increase in the limit will support the projected issuance of T-bills, Singapore Savings Bonds, and Singapore Government Securities (Market Development). These securities will mainly help foster the development of Singapore’s vibrant government securities market, which the MOF said serves as a foundation for the growth of both the corporate and retail debt markets. They are also issued to meet the demand for high-quality liquid assets, according to the ministry. The issuance limit was last raised to S$1.065 trillion in 2021, with issuances expected to reach that cap by 2025. Mr Chee noted that as of the end of October 2024, the outstanding amount of government securities and T-bills issued under the Government Securities (Debt Market and Investment) Act stood at S$955 billion.

Jamus Lim raises concerns over size of debt issuance limit increase and its impact on businesses

Associate Professor Jamus Lim, Member of Parliament for Sengkang GRC, expressed concerns over the proposed increase, noting that it surpasses previous hikes. He highlighted that this adjustment represents the largest increase among the last five instances. The Workers' Party MP also questioned how the government plans to manage the fiscal impact of higher interest repayments, which are now greater than in 2021, and whether such debt issuance has led to "actual, usable, investable" funds for companies in Singapore. In response, Mr Chee explained that the increase aligns with historical trends and is comparable in percentage terms to previous adjustments. He added that Singapore’s debt is fully backed by assets, allowing the country to borrow on more favourable terms. Mr Chee also pointed out that the financial sector is a significant source of employment for Singaporeans. He further clarified that the proceeds from the issuance of these securities are invested, not used for government spending. “The government does not borrow for recurrent spending needs, so as not to overly burden future generations, who would have to service the debt incurred by current and previous generations,” he said. The increase in the issuance limit will not affect the government’s fiscal position or be used for spending purposes. While other nations may borrow to fund recurrent spending, Singapore borrows exclusively to finance major infrastructure projects under the Significant Infrastructure Government Loan Act (SINGA), with SINGA accounting for less than 2 per cent of the total amount the government borrows. SINGA also has a separate borrowing limit. Mr Chee added that although Singapore’s gross debt-to-GDP ratio may appear high, it does not fully represent the country’s financial position, as it does not take into account Singapore’s assets, which far exceed its liabilities.