Transparency of Government Reserves — Speech by Gerald Giam

Mr Speaker,

In our quest to safeguard the Singapore dollar, especially from the volatilities of currency crises, it is important for a country to hold sufficient Official Foreign Reserves (OFR). We’ve seen the dire consequences of not having enough in the tank during Thailand’s ordeal in 1997. The country’s struggle, stemming in part from currency speculation, led to a severe depletion of its OFR. This forced it to float its currency, triggering an economic crisis which affected the whole region, including Singapore.

The Monetary Authority of Singapore (MAS) has assessed that the “optimal” amount of OFR it needs to provide a “strong buffer” against stresses in the global economy and market is between 65% to 75% of GDP. The central bank assessed this level based on internationally-accepted measures of reserve adequacy and its own practical experience in foreign exchange intervention to ensure the stability of the Singapore dollar.

Since the MAS (Amendment) Act came into force on 21 February 2022, MAS has been allowed to subscribe to Reserves Management Government Securities (RMGS). This allows the transfer of OFR to the government for the long-term investment by GIC. This is OFR above what MAS needs to conduct monetary policy and support financial stability. Should there be a need to supplement the OFR on MAS’ balance sheet in the instance of a tail-risk event, it can redeem the RMGS before maturity at par.

Based on a parliamentary reply by DPM Lawrence Wong to me, as at September 2023, MAS’ current OFR stood at S$455.5 billion or 70% of GDP, with the potential to ramp it up to 106% of GDP by redeeming the RMGS holdings of S$237.6 billion.

This means MAS effectively has access to 31% more foreign reserves than the high end of the range it assesses to be optimal to defend the Sing Dollar.

The value of both MAS’ OFR and RMGS have been revealed publicly. So has the value of Temasek Holdings’ net portfolio. What remains is the value of the reserves held by GIC, which it has only revealed is “well over US$100 billion”. It is estimated to be worth many multiples of that.

In a parliamentary reply on 3 Oct 2023, DPM Wong said we need to brace for extreme tail-risk scenarios, including crises of unprecedented scale that could lead to significant capital outflows beyond MAS’ reserves, or emergencies caused by state or non-state actors threatening our economy, livelihoods or national existence.

Sir, the spectre of extreme scenarios cannot be a carte blanche for maintaining a veil of secrecy over the reserves. Is the government keeping the reserves held by GIC a secret only to prepare for extreme tail-risk scenarios, or is it also to avoid questions from MPs and the public on why our substantial reserves aren’t being invested more in Singaporeans?

Greater transparency serves to both improve governance and foster a more inclusive and informed discussion about our nation’s future. Transparency about the size of our reserves will facilitate more robust public discourse and democratic debate about our country’s long-term budget and expenditure plans. It will ensure that decisions regarding the use of our national wealth are made with the participation and understanding of citizens. Most importantly, it will increase accountability, as my Hon. Friend from Sengkang Jamus Lim has explained in his speech, and build more trust in the government.

Conversely, expecting Members of Parliament to scrutinise, debate and approve the government budget and each ministry’s allocation without full knowledge of our reserves is comparable to making a decision on buying a house without knowing how much money they have in their largest bank account.

Mr Speaker, I urge a review of the government’s stance on the secrecy of the reserves.

If the government wishes to maintain its strategic ambiguity regarding the full size of the reserves, the figures could be shared confidentially with MPs or with a cross-party Standing Select Finance Committee that looks into the health of our reserves and government finances, which the Leader of the Opposition has proposed.

This parliamentary committee will then be able to properly consider the specific funding needs vis-a-vis the threats that Singapore must prepare for and make recommendations to the government on how these needs could be funded.

I support the original motion.