Let's scrutinise the Government Assets & Liabilities Statement as at 31 Mar 2022 and see if the state coffers are indeed brimming..... or bare.
Government assets as at 31 Mar 2022 (S$ millions)
CASH |
61,227 |
|
INVESTMENTS: |
||
Government Stocks |
421,712 |
|
Others - Quoted |
566,999 |
|
Others - Unuoted |
497,693 |
|
With Agents |
24,044 |
+1,510,448 |
| TOTAL ASSETS |
1,571,675 |
Leong Mun Wai once said the total assets is a 'proxy' for the national
reserves. I have blogged this is not so, and you can see the reason why.
HOW IS THE CONDITION OF THE STATE COFFER
Let's look at whether the total assets are actually sufficient for the government, based on actual numbers as at 31 Mar 2022 and some assumptions, necessitated by a blackout on information.
Assets that can't be spent:
A substantial part of the cash is transferred to GIC + Temasek to invest, and some invested by other
agents. The government invests some of the funds themselves. Not all the assets are available for the government to spend. These are:
(1) Government debt in the form of securities (other than SGS {infras} under the SINGA - Significant Infras Govt Loan Act). this was
S$980,583,063,000. Proceeds of these borrowings cannot be spent.
(2) Funds transferred to GIC+Temasek includes proceeds from land sales and budget surpluses. The government cannot spend these which form part
of national reserves. Nobody knows how much this is accumulated over the years. For the purpose of this discussion, let's just use some pretty
conservation estimates -- Land sales at S$100b and budget surpluses at S$50b.
(3) Fiduciary funds, ie money held by the government on behalf of third parties. Substantial part of this is from statutory boards which must
deposit their excess funds with the government under a Centralised Liquidity Management programme. This was S$42,604,000,000.
(4) Endowment Funds where the principals cannot be spent. The money have been locked in investments. We do not know the principal sums, but for estimates, let's just take the balances in the fund statements. These are Edusave Endowment Fund - S$6,704,277,000; Lifelong Learning Endowment Fund - S$5,003,745,000; Eldercare Fund - S$3,695,416,000 and Community Care Endowment - S$2,431,988,000.
Read: A primer on government accounting to understand the intracies involved. You need to understand this to be able to analyse government financials.Translation and revaluation losses:
The huge translation losses of the MAS generated much internet comments. Many (especially PAP supporters) argued it's a paper loss. When rates change, the situation will be reversed. I suppose the same can be argued for valuation. Translation and valuation is a time-based recognition of losses. To have a view on adequacy of funds, we look at the financial status on a realisation, instead of an ongoing, basis.
For quoted and unquoted equities, we have no idea what the value should be. Let's simply take the book values. However, there is S$422B in government stocks. These are Treasury Bills and Bonds of other governments. In the rising interest rates environment, these assets face tremendous losses. Let's estimate a conservative loss of just 2% = S$8B.
What's the net assets available :
From the total assets, we deduct money that cannot be spent and valuation losses to arrive at the net assets available to cover the balance in the Consolidated Funds (that is carried into the next fiscal year), and funds appropriated to be spent in various programmes, both committed and contingencies.
S$(million) |
S$(million) |
|
| Total Assets |
1,571,675 |
|
Less: Debts |
980,583 |
|
Land sales |
100,000 |
|
Budget surpluses |
50,000 |
|
Fiduciary accounts |
42,604 |
|
Endowment funds |
17,836 |
|
Valuation losses |
8,000 |
-1,199,023 |
Net assets Available |
372,562 |
Adequacy of net assets available :
We now apply the net assets available to funds which have been appropriated and committed in prior budgets.
S$(million) |
S$(million) |
|
| Net Assets available |
372,562 |
|
| Less Consol Fund c/f |
-303,367 |
|
Less funds appropriated : |
||
Development Fund |
149,542 |
|
Contingencies Fund |
140,000 |
|
Devt Contingencies Fd |
2,000 |
|
Devt Investment Fund |
12,122 |
|
Pension Fund |
12,350 |
|
Saver Premium Fund |
1,848 |
|
INVEST Fund |
1,965 |
|
Elder Care Fund |
3,695 |
|
CONNECT Fund |
570 |
|
National Research Fund |
2,083 |
|
GST Voucher Fund |
9,129 |
|
Pioneer Gen Fund |
6,162 |
|
Merdeka Gen Fund |
5,717 |
|
Long Term Care Fund |
4,929 |
|
Public Transport Fund |
23,844 |
-375,955 |
DEFICIT |
-306,760 |
Subject to the accuracy of some assumptions discussed above, it seems the government coffer comes up short of S$307B.
It is also clear the total assets have nothing to do with national reserves. Neither is it a proxy for, or estimation of, the quantum of national reserves.
THE SECURITIES FUND
The government issues various types of securities for various purposes the proceeds of which cannot be spent. These are :
* SGS (Market Devt), Treasury Bills - For market-making activities and SGD yield curve discovery
* SSB (Spore Savings Bond) - For retail investors
* On-demand SGS (Market Devt) - For liquidity management in MAS repo facility activities.
* RMGS (non-marketable) - For transfer of MAS foreign reserves to government
* SSGS (non-marketable) - For the investment needs of CPF (national pension) and some non-govt Trust funds
The proceeds on issuance, redemption, advance deposits, revenue and expenses of the securities that cannot be spent are recorded in the Securities Fund. No money is appropriated from the Consolidated Fund to help meet cash outflows. And no money is transferred to Consolidated Fund for spending. There is however, a proviso. The Minister has the power to transfer funds in excess of its needs to the Consolidated Fund.
The Securities Fund Statement shows a balance of S$981B and the Statement on Govt Borrowing showed face value of the securities + advance deposits at S$873B. The difference of S$109B means the fund has massive liquidity to meet its operations of securities turnover (issuance and redemption) especially for market development securities whose volume is extremely high.
Of interest is SSGS. Outstanding 2022 was S$515B fully invested by CPF. SSGS continues to grow over the years as CPF contributions continue to climb despite a greying population. So the huge numbers of foreign CECA employees helped out. Nevertheless the deficit in the coffers of S$307B could well have partly motivated the many retrospective changes in CPF regulations for delayed withdrawals, which is why CPF continues to experience net cash inflows.
SGS (INFRASTRUCTURE) ISSUED UNDER SINGA
The Significant Infrastructure Government Loan Act came into force in 2021. This allows the government to borrow up to S$90B to finance major long term infrastructure projects over the next 15 years. As at 2022, total SGS securities issued and outstanding is S$2.6B. For 56 years since independence on 9 Aug 1965, Singapore has lived under a legislation of no government debt for fiscals. Has the 3rd gen leadership opened the floodgate to fiscal borrowing? SINGA is only for S$90B, but the cap can always be lifted when required.
Recently, the government has finalised the Green Bond Framework. This is the guideline for the issuance of a new type of government security called Singapore Sovereign Green Bond to be issued under SINGA. This is debt to finance green infrastructure projects. By 2030, S$35B of green bonds will be issued.
CONCLUSION
It does appear these is insufficient assets in the government coffer. The question is exactly how much. The S$307B deficit is just my conservative guess.
