Singapore to contribute $44 million to IMF grants to help vulnerable countries

SINGAPORE - Parliament on Feb 4 approved a contribution of US$34.7 million (S$44.1 million) to two International Monetary Fund (IMF) grants aimed at helping vulnerable member countries deal with economic shocks.

The support will take the form of 25.48 million in special drawing rights (SDRs), an IMF-created asset that can be exchanged by member countries into specified currencies, including the US dollar, to meet balance-of-payment needs.

A total of 21 million in SDRs – the equivalent of about US$28.6 million – will be channelled to the IMF Poverty Reduction and Growth Trust (PRG Trust).

The other 4.48 million – the equivalent of about US$6.1 million – will be put towards the IMF Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries (PRG-HIPC Trust), supporting the provision of debt relief to Sudan.

Minister of State for Trade and Industry Alvin Tan, who sought Parliament’s approval on behalf of Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong, said the contributions

have been assessed as reasonable by the Monetary Authority of Singapore

.

Mr Tan said the amount was in line with Singapore’s quota share at the IMF, determined by measures such as gross domestic product.

He also said the contributions will not draw on past reserves or affect the Government’s domestic expenditure for Singaporeans.

He added: “Every dollar we commit abroad must be weighed against our needs at home, for our seniors, for our healthcare and our social safety nets.

“Our contributions do not require Singapore to overextend ourselves, even as we do good.”

A total of six MPs spoke at the debate on Singapore’s contribution to IMF: PAP MPs Saktiandi Supaat (Bishan-Toa Payoh GRC), Ng Shi Xuan (Sembawang GRC), Lee Hong Chuang (Jurong East-Bukit Batok GRC), Shawn Loh (Jalan Besar GRC) and Victor Lye (Ang Mo Kio GRC), and WP’s Jamus Lim (Sengkang GRC).

The PAP MPs are members of the Government Parliamentary Committee for Finance and Trade and Industry, which is chaired by Mr Saktiandi.

Mr Saktiandi and Mr Loh noted that Singapore has benefited from a multilateral world order, supported by multilateral institutions like the World Bank and the IMF.

However, they questioned if it was still in Singapore’s interest to contribute significant amounts to the IMF in an environment where multilateralism is under threat, and where many countries are becoming more protectionist.

Mr Loh said that in the current world order, institutions like the IMF may find it increasingly difficult to perform the duties they were set up to do.

He added: “I do not expect the Government to find a comprehensive answer at this juncture. But I thought to leave these questions as food for thought, because there’s an old adage: If you don’t have a seat at the table, then we might find ourselves on the menu.”

In response, Mr Tan said the IMF grants have continued to draw strong support, with more than 40 countries pledging contributions to the PRG Trust, and over 120 countries supporting the PRG-HIPC Trust.

Contributors to the PRG-HIPC Trust include the US, Japan, China, South Korea, as well as countries in South-east Asia, Mr Tan said.

He added: “Singapore must and will continue to support key multilateral institutions such as the IMF.

“As a small city-state with an open economy and a global financial centre, Singapore has a strong interest in the continued stability of the international monetary system, which the IMF plays a principal role in safeguarding.”

Meanwhile, Associate Professor Lim asked why Sudan was selected as a beneficiary of contributions to the PRG-HIPC Trust.

The Workers’ Party MP pointed out that there are 39 countries listed on the PRG-HIPC Trust beneficiary list, including Afghanistan with “equally crushing debt burdens”.

Mr Ng also raised concerns about providing a grant to Sudan, as it does not have strong financial institutions and is involved in an ongoing conflict.

Responding, Mr Tan said the IMF has provided debt relief to 38 out of the 39 eligible countries through the PRG-HIPC Trust, of which Sudan is the last of them.

He added that the institution has a framework for its grant programmes, such as requiring countries to embark on key structural reforms.

Several MPs also questioned Singapore’s plan to direct 746 million in SDRs, equivalent to about US$1.01 billion, towards a loan to IMF’s Resilience and Sustainability Trust, a move that does not require parliamentary approval.

The multilateral effort, which helps vulnerable nations address longer-term structural challenges such as climate change and pandemic preparedness, has so far been supported by 21 other countries.

Mr Tan said 746 million SDRs was a “relatively small” amount, in the context of the 3.73 billion SDRs that IMF issued to Singapore in 2021, as part of an issuance to all member countries. He added that IMF has always repaid its creditors, and that Singapore will be remunerated at the SDR interest rate.

The IMF has in recent years asked members with strong external positions and ample reserves to channel some of their allocated SDRs to support vulnerable countries.