Three months back, I highlighted some issues raised by Prof Christopher Balding regarding Singapore’s public finances. Somewhat unusually, the Singapore government has deigned to publish a public rebuttal (excerpt):
From time to time, there are claims that the Singapore Government is covering up losses in our reserves, or that Singaporean CPF monies are not safe. Some recent online postings have even claimed that GIC and/or Temasek are reporting false returns to cover up losses, or that the Government siphons monies from its Budget or from Government borrowings so as to pad up GIC and Temasek’s books.
The Government does not publish the size of assets managed by GIC, although the asset size of MAS and Temasek are published. On the basis of the information that the Government has published, as well as the full system of checks and balances, these recent claims are baseless. Indeed, they are fantastical, but let’s look at some basic facts…
The article is written as a FAQ, and presents some useful information on the structure of public wealth management in Singapore. As far as the basic facts are concerned, I’m inclined to accept it as written. I don’t think the Singapore government would be willing to risk their credibility by publishing mis-truths.
The explanation regarding debt issuance for instance fits in with I’ve been told privately, and given the numbers that are publicly available, I’ve never been concerned that CPF member funds were ever at risk.
Having said that, going beyond the bare account for how the money is raised, who manages it, and where it goes to, some questions still need to be answered:
- Given the published rates of returns gained by Temasek and GIC, why aren’t ordinary Singaporeans benefiting more through their CPF membership?
- While I understand the need to issue public debt to help develop the capital markets, why the accelerated rate of issuance? Singapore government debt issuance is outpacing nominal GDP growth.
- One partial explanation I can think of is that SGS and Singapore T-Bills – the publicly traded portion of Singapore’s government debt – is effectively being used to manage domestic liquidity in lieu of MAS issuing its own debt (this reason would also explain the large government cash balances at MAS). This hypothesis was confirmed by a read through of the latest MAS annual report, as MAS was only authorised to issue short-term MAS bills in 2010 although the outstanding amount remains small relative to SGS and T-Bills (I have to say that the info on MAS’ balance sheet was singularly unhelpful). But that implies responsibility for monetary policy is effectively segregated, and made unnecessarily complicated.
- On the macro side, while I can acknowledge the legal strictures under which Singapore’s government operates (balanced budgets over each parliamentary term), that doesn’t mean that it makes any economic sense to me. Given high private savings, tacking on public savings on top of that simply means either deficient domestic demand (not true), or capital being exported (definitely true), or someone (read: households) taking on loads of debt to maintain consumption (wanna guess?). Here’s a good case of unintended consequences, and puts the whole load of macro-stabilisation on the shoulders of monetary policy, which is already institutionally schizophrenic.
- And there’s still no good explanation, or any explanation for that matter, regarding the poor level of per capita spending on public services.
So on the whole, while I don’t seriously believe there’s a “hole” in the public accounts, there still remain some tough questions that haven’t been answered.