Singapore Savings Bond — Is the Country Borrowing Too Much?

The Straits Times has been running helpful articles on how the public can invest in the Singapore Savings Bond (see “Singapore Savings Bonds: What you need to know” and “Use ATMs to apply for S’pore Savings Bonds“).

However, in a recent issue (August 10) of The Edge magazine, Paul Ho, founder of http://www.iCompareLoan.com, raised concern over the heavy indebtedness of the country:

The Singapore Savings Bond is schedule for release in 2H, 2015. The initial tranches are for 1 to 2 billion dollars. The offered interest rate is about 2.5% (if held to maturity of 10 years). The amount being raised is still insignificant relative to the overall deposits. Nonetheless it is worrying that Singapore is borrowing so much despite being one of the world’s most indebted nations at Debt to GDP ratio of 382%. A large part of these debt is owed via the CPF. Savings Bond is unlikely to affect Singapore’s interest rates in the short term due to the small tranche. This is nonetheless a worrying trend in the longer term when the tranches gets bigger, sucking up more funds and impacts interest rates.

Indeed, Forbes magazine previously noted that Singapore is one of the seven most indebted nations in the world.

Interestingly, in the “Singapore Government Borrowings: An Overview” report that was issued in July 2011 by the Accountant-General’s Department, it was written:

Purpose of Borrowings

Given that the government is now (in 2015) issuing bonds, would it not imply that the nation has a budget shortfall?

If so, why are we not able to live within our budget?

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