MP concerned over call for transparency on size of reserves

Singapore should never reveal the full extent of its national financial reserves, said Mr Saktiandi Supaat (Bishan-Toa Payoh GRC).

"Publicising data from our reserves is akin to revealing the size of our ammunition to hedge funds and speculators out there with large pools of funds to play with," he added yesterday.

He was expressing concern over the call made on Wednesday by Non-Constituency MP (NCMP) Hazel Poa for more transparency on Singapore's financial reserves. The Progress Singapore Party (PSP) member had argued that MPs were being asked to vote on a Budget that would require a draw on the reserves, without being informed of its actual size.

But Mr Saktiandi, who is foreign exchange research head at Maybank, explained that Singapore's utilisation of the exchange rate as its instrument of monetary policy - unlike most other countries which use interest rates - rendered the Republic vulnerable to currency speculation and attacks.

He cited the 1997 Asian financial crisis and its impact on the economy and jobs, saying: "As a financial centre, there's also the risk of capital flows if our currency is attacked for speculative reasons. I don't think we want to add the element of this risk into the equation for our Singaporean job seekers."

He said the potential risks and downsides outweigh the benefits of transparency. "Transparency is practised where it is safe and sensible to do so, and it isn't true that our reserves are completely undisclosed. For example, the fund sizes (of Temasek and the Monetary Authority of Singapore) are made public, only GIC's is not."

He added he was "seriously" concerned over previous suggestions by PSP's other NCMP Leong Mun Wai to increase Singapore's use of the Net Investment Returns Contribution (NIRC) framework.

Under the framework, the Government can spend up to 50 per cent of long-term expected real returns, including capital gains, on its relevant assets.

Mr Saktiandi said: "If we use all now, there is little, if anything, left in terms of NIRC for the younger and future generations to come.

"By ploughing back 50 per cent, we continue to grow our reserves while at the same time allowing the Government to tap part of the investment income for current spending."

Workers' Party MP Jamus Lim (Sengkang GRC) then rose to say he disagreed with Mr Saktiandi's point that revealing the reserves would be destabilising.

"It could also encourage stabilising speculation," said the economics associate professor. "If we were off our fundamentally determined exchange rates, we could encourage market participants to actually engage in speculative activity that would get us back on to our fundamental exchange rate.

"(And) while it is convenient to argue that we have a distinct system in terms of exchange rate policy, by purchasing power parity, all exchange rate policy is in fact monetary policy. So even though it is the case that we target explicitly the exchange rate, it will have implications for inflation."

Mr Saktiandi replied: "The impact of the currency attacks can never be stabilising. It has ramifications on the economy, it has ramifications on jobs."

He returned to the Asian financial crisis, saying its impact on some countries in the region was significant to the point that their currencies depreciated, with cascading effects on the economy.

"That's from my own lived experience in 1998, 1999," he said. "The theoretical element that you shared… does not make sense. Unless you're talking about misalignments in the long run that eventually correct themselves in time."

Prof Lim said: "I should point out that I am in fact old enough to have also lived through the Asian financial crisis and I'm aware of the conditions surrounding it. So this is not just in theory, it was also my lived experience."

Mr Saktiandi added that Singapore's trade-driven economy and reliance on exchange rate as a controllable, intermediate target were distinct from countries such as Norway, a petrol-driven economy that uses a policy interest rate or deposit rates in its central bank, and with its exchange rate freely floated. "Direct intervention in the markets using currencies ought to have a direct impact on the Singapore dollar... and the rundown on our reserves," he said.

A version of this article appeared in the print edition of The Straits Times on February 26, 2021, with the headline 'MP concerned over call for transparency on size of reserves'. Subscribe