My admiration for Singapore lies mainly in the way the whole country is financed in a smart and sustainable way.
In particular, the way the government – through self-imposed laws – is not allowed to spend in deficit and has to accumulate surpluses, which are invested profitably through the Monetary Authority Singapore (MAS), GIC and Temasek Holdings.
The last of the three just posted record returns of 24.5% for the year ending March 31, 2021, supported by stock market rallies fueled largely by global stimulus packages launched in crisis-stricken economies of COVID-19.
This took the total value of the portfolio from S $ 306 billion to S $ 381 billion – and the increase is expected to continue as long as governments around the world release fiscal and monetary measures to avoid deeper economic problems. , with a large chunk of funds pushing the stock markets higher and higher.
In other words, after decades of careful financial planning and public investment, Singapore is making money while others are desperate to escape the wreck.
Temasek’s shareholder return of S $ 75 billion alone is greater than the total S $ 53.7 billion of local relief spending programs adopted in 2020 and 2021, supporting the economy, avoiding layoffs , helping Singaporean businesses weather the pandemic storm.
S’pore won $ 235 billion in reserves in MAS, Temasek
That’s not all. As COVID-19 rocked the world, Singapore’s foreign exchange reserves under MAS management swelled by an additional S $ 160 billion.
At the end of 2019, the total official foreign exchange reserves stood at S $ 375 billion, rising to S $ 478 billion at the end of 2020 and S $ 535 billion in June 2021.
In total, Singapore earned S $ 235 billion in reserves in these two entities (MAS and Temasek Holdings).
Even if we subtract the ca. S $ 54 billion it had to devote to support programs in 2020 and 2021, it is still up S $ 181 billion – and this is even without the GIC posting its results (expected d ‘by the end of this month), which should be just as strong, as they are spurred on by the same underlying causes.
While we don’t know the exact amount under GIC’s management, the net impact on reserves is also expected to be at least tens of billions of dollars.
As a result, even if we factor in all the economic pain suffered by the pandemic and the massive spending the government has had to use to prop up the country, the city-state is easily over S $ 200 billion richer than it is. it wasn’t before COVID-19 wreaked havoc on the world.
Of course, there is a caveat. These gains are not necessarily permanent and may still fluctuate depending on the international situation and the demand for the Singapore dollar.
However, it also highlights the sheer genius of Singapore’s reserve system. It is designed in a way that not only generates healthy and stable returns over the long term, but its diversified investments act as shock absorbers, balancing the impact of negative external events.
S’pore will not be at a disadvantage whatever the economic conditions
Due to a strong combination of stocks (for high growth) and government-issued securities like bonds (for security and stability), coupled with a strong currency, a global net creditor status (c ‘ that is, Singapore is a creditor of other countries and does not have any external public debts to worry about), there is hardly a situation in which the city-state would be badly off.
If the world economy is good, it is obviously also good for Singapore.
If the global economy is doing badly but countries are using fiscal and monetary measures to stimulate their economies (as is the case today), Singapore again profits thanks to its foreign investments, even if the domestic GDP suffers a temporary blow.
The icing on the cake is that Singapore does not have any external public debt to speak of (since it cannot borrow to finance budget deficits), and it has now added another tool to make the most of it. of its financial strength.
Under the recently adopted SINGA, the government can borrow up to S $ 90 billion to finance long-term infrastructure investments, which is in fact cheaper than if it wanted to unwind some of its reserves for do it. It would lose more in returns on lost investments than it has to pay to lenders.
In other words, even when it borrows, Singapore is actually making more money than if it didn’t.
Unlike other countries, which are now indebted to enormous levels, pushing the burden of its repayment to future and aging generations, Singapore is in fact using debt to maximize returns on its various investments and be even more resilient in the face of challenges. global crises. .
In this particular Covid-19 pandemic, this has not made the country weaker, but richer than ever.
Featured Image Credit: Edgar Su via Reuters
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