Singapore 8th most indebted nation on the face on this earth!

[omnia1]

This is a great place to learn economics. So, govt sells AAA securities to us and holds the CPF money as reserves. However, I was lost after that. What does the govt do with the money under this CPF reserves? Keep it in the vault, make more money by re-investing, use it to fund infrastructural project.... Experts please help me?

Once the CPF monies flow to the government, it will be invested (together with the rest of government surpluses) in a variety of instruments mainly through GIC and Temasek.

But bear in mind that the government provides a blanket guarantee on these CPF monies that it owes (or "keep in trust" as preferred by some others on this thread). Meaning that the securities that are 'sold' to CPF Board (called Special Singapore Govt Securities or "SSGS") are different from the normal govt securities sold to the market (called Singapore Govt Securities or "SGS"). Unlike SGS whose value would fluctuate in line with market conditions, the value of SSGS sold to CPF Board is fixed regardless of market conditions or whether there are gains or losses on government investments. The money value of your CPF therefore remains the same and will continue to earn the same pre-determined interest rate (based on the fixed/savings deposit rates of major local banks).

MOF provides quite a good info page on Singapore's reserves that you can read up on if interested - MOF: Our Nation's Reserves. Cheers.

 

[Zombie]

What does the govt do with the money under this CPF reserves?

govt receives money, it is up to govt how to use it

but even if govt does not know how to use, the money is already "working" very hard at very little cost

how?...

1) govt has now lots of money ie there is no need to borrow
2) no need to borrow means no real need to sell debts in the primary debt market
3) but there are always people needing to buy debts (eg maintain liquidity ratio), thus bid in auctions to pay the highest price for debts (ie highest price means lowest interest rates)
4) this means that the govt has the ability to influence the interest rates with the level of supply (imagine HDB new flats supply)
5) this primary debt market interest rates will form a benchmark for the secondary debt market to follow... and so on... eventually the bank rates will follow...
6) in a way this is good because the cost of financing can be stabilised at cheaper interest rate level, encouraging healthy business development and growth...
7) more people can finance their investments in properties also
8) but lower interest rates may be bad for inflations
9) and you get lower interest returns from your cpf, because it is based on bank rates..

2c from layman

 

[Papsmearer]

I came across this comment/article. It raises several valid points.

You think our boat is unsinkable?

Yes, as a fund manager myself, (007), I was shocked at 16/8/2011 issue of Fortune Magazine that showed Singapore has a sovereign debt of US$254
billion(95% of GDP). At 8th position, we are just behind 7th position USA (indebtedness of US14.3 trillion - 99% of GDP). Japan is No. 1 with
indebtedness of US$13.8 trillion(234% of GDP). Guess we were all in the dark - the size of our govt.'s sovereign indebtedness.

Japan is OK as it borrowed 100% from its own citizen (thru' Postal Savings Accounts) and its debt is in Yen (no FX risks).

US debt is 32% foreign-owned and is in US$ (no FX risks). US Fed (as a Central Bank) can print US $ notes to pay any coupons & fulfill all
treasuries redemption if worst comes to worst. Like Japan, USA can NEVER default as they both can print Yen and US$ respectively to repay ALL
sovereign debts/obligations they owned locally and to foreigners alike.

Singapore govt. borrowed S$ from our CPF thru MAS/govt long term bonds. The bulk (no one outside PMO/GIC/Temasek know the figure) is converted to
foreign currencies (with FX risks) and invested overseas. Late ex-President Ong TC tried but failed to get such info, despite govt. denial. These foreign

investment is subject to FX risks and as MAS cannot print S$ at will (under Currency Board regime), Singapore govt. is limited in its response to adverse

FX risks and may not have enough to repay CPF Board in S$ at the end of the day. We may not default, but our diminished foreign investment in S$ terms

may face a huge shortfall ! !

Little wonder that I can only see my CPF money at 65 years old (not 55 as it was intended when I started work over 30 years ago). Worst, I can only draw
down the min. sum at monthly staggered manner over next 20 years.

I suppose the govt. needed my CPF money and the rest of Singaporeans' to invest/cover losses for foreign investment? I did not give them my permission

for govt. to use my CPF money after I reached 55 years old for risky foreign investment!

Did you folks give permission to govt. too ?

Compared with Norway, Sweden, China, Saudi Arabia, Kuwait and UAE that have invested sovereign funds overseas, our GIC's and Temasek's returns are much
lower (notice how GIC/Temasek always FAILED to provide comparison of their annual performance with others). These were always reported in absolute and
not bench-marked. Bet you - they would not fail to highlight their out-performance against these foreign sovereign funds if these were so !

The govt. should use our CPF money to invest locally in more schools & universities (generous subsidies/scholarship to citizens only), more subsidised HDB

flats (citizens only), more hospitals & medical training capabilities(citizens only) and better transport, etc. These are good and safe infrastructure investment

on this island-state and is in S$ - there is also no FX risks, just like Japan and USA.

Fortunately, the country still enjoys Triple A credit rating due to its high sovereign funds, but how long will this last, since all this is very secretive?

 

[Fook Seng]

No I don't remember giving my permission for my CPF to be invested in any way. But I guess the President is giving the permission on all our behalf.

 

[zeebjii]

Look at the table again. I dont know much about belgium, but it's no secret the rest of the countries are in real deep shit, one way or another. Dont tell me singapore are different or special..