President Halimah Yacob has given her approval for a law which will allow the Government to borrow for major long-term infrastructure, the first time such loans will be allowed since the framework for protecting Singapore's reserves was established in 1991.
All proposals on borrowing must be carefully scrutinised by the President, who is custodian of the country's past savings, and the Government can raise loans only after she has given the nod.
"This is a prudent and considered approach. Borrowing obliges future generations to make good what the current generation has committed to, failing which, the burden naturally falls on our past reserves," she said after she gave her assent to the Bill for the Significant Infrastructure Government Loan Act (Singa) yesterday.
Under the new law passed by Parliament last month, the Government will be able to borrow up to $90 billion to pay for infrastructure that will last for at least 50 years. The annual interest threshold of such borrowings cannot exceed $5 billion, and each project funded under the law must be sizeable and cost at least $4 billion.
Describing Singa as an "important waypoint" under the reserves protection framework, Madam Halimah said the law will allow the Government to distribute fiscal responsibility more equitably across the generations of people who will benefit from the projects.
"I am glad that parliamentarians had a robust debate during last month's second reading of the Singa Bill," she added.
She said the Government had briefed her and the Council of Presidential Advisers on the proposal, and assured her that there would be safeguards to make sure the borrowing is done in a sustainable and responsible manner so that future generations of Singaporeans will not be saddled with overly onerous financing costs.
The President noted that this is important as it would help to mitigate the risk of future draws on Singapore's past reserves due to such borrowings. "Singapore has, thanks to the wisdom of past leadership and good governance, accumulated our national reserves over many past generations. We similarly owe it to our future generations to steward these reserves responsibly," she added.
During the debate on the law in Parliament last month, Deputy Prime Minister Heng Swee Keat, who was also Finance Minister then, said Singapore was embarking on a "generational upgrade" to its infrastructure over the next 15 years, and borrowing to pay for the major infrastructure projects will help to smooth out the hump expected in development spending. With major highways, the Cross Island and Jurong Region MRT lines, and climate adaptation structures in the works, Singapore expects its yearly development expenditure to rise to around 5 per cent of gross domestic product, compared with the current baseline of 3.7 per cent.
Singa will help to lower the yearly figure to 4.2 per cent for the next decade.
Madam Halimah said borrowing for development spending was not new. In the 1960s and 1980s, when Singapore lacked the resources for rapid development as a young nation, borrowing was "the only way for our finances to keep pace with our ambitions".
Even as Singapore protects its past reserves so future generations can also benefit, stewardship also means planning for the future, she said.
"The best gift to future generations is to start building a solid foundation now. Only then will we be able to maintain the momentum of Singapore's long-term development," she added.
"Therefore, let us invest in a better Singapore for all, so that together we can create a brighter future for everyone."