"Bretton Woods Agreements (Amendment) Bill 2016" - Second Reading Speech by Mr Lawrence Wong, Minister for National Development, on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in Charge of the Monetary Authority of Singapore on 11 July 2016

Mdm Speaker, I beg to move, “That the Bill be now read a second time”.

INTRODUCTION

2   In July 2009, the International Monetary Fund (“IMF”) agreed to boost its capacity to lend to low-income countries impacted by the global financial crisis, through a new Poverty Reduction and Growth Trust (“PRGT”). The PRGT is the IMF’s concessional lending vehicle, which provides lending facilities tailored to the diverse needs of low-income countries. To fund the PRGT, IMF members agreed in 2012 to contribute at least 90% of distributed profits from the sales of gold holdings at the IMF.

3   As a highly open economy and international financial centre, Singapore has a strong stake in preserving a healthy global economic environment. This includes doing our part in the IMF’s efforts to assist low-income countries. The PRGT will help support developing countries in Asia such as Cambodia, Lao PDR, Myanmar and Vietnam, whom we share growing economic ties with.

4   The amendments to the Bretton Woods Agreements Act will allow MAS to participate in the PRGT through a US$20.0 million grant paid from Singapore’s share of the IMF’s gold sales profit. The grant is subject to Parliament’s approval. Any future grant to the IMF will also require Parliament’s approval. 

5   Mdm Speaker, I will now go through the main amendments of the Bill.

KEY PROVISIONS IN THE BILL

I. Set out powers to provide financial assistance to the IMF, including loans, grants and interest-free deposits

6   MAS currently has powers to provide loans and interest-free deposits to the IMF under the MAS Act, but not grants. The Bill will empower MAS to make grants to the IMF, but only with Parliament’s approval. The amendments will also consolidate MAS’ existing powers to provide financial assistance to the IMF, including loans and interest-free deposits, into this single Act.

II. Set out strong safeguards when providing financial assistance to the IMF

7   The Bill will add the following safeguards that apply when MAS provides any loans, grants or other financial assistance to the IMF:

a. First, any financial assistance can only be provided pursuant to a specific request from the IMF. In addition, MAS will provide financial assistance only as part of collective action among IMF members.

b. Second, in the interest of transparency, the Minister in charge of MAS must publish in the Gazette a statement containing key information about the financial assistance. This statement will contain a description of the nature and terms of the agreement to lend, give grants or other financial assistance, and the maximum amount that MAS has agreed to lend or give to the IMF. While MAS has in the past issued media statements and provided answers in Parliament on such assistance, such as in the case of MAS’ contingent loan to the IMF in 2012, a Gazette notice as required in this Bill will provide further transparency.

c. Third, specifically in the case of a grant to be given by MAS to the IMF, the Bill provides that Parliament’s approval by specific resolution is required. This is because grants are treated as expenses. This is unlike loans to IMF which are to be repaid at maturity, and are recorded as assets in MAS’ balance sheet. Loans to the IMF remain part of Singapore’s Official Foreign Reserves, which are managed by MAS as the central bank.

III. Provisions for early repayment

8   Currently, agreements to provide loans to the IMF include a safeguard that obliges the IMF to immediately repay the loan in the event that Singapore has a balance of payments need.

9   The Bill will introduce a new safeguard for loans and other financial assistance provided to the IMF. Such agreements must include provisions for MAS to require early repayment in the event of suspension, or premature termination, of the IMF programme for which the assistance was provided.

CONCLUSION

10   Mdm Speaker, it is in Singapore’s interest to continue to support the IMF as a global multilateral institution and its efforts to maintain a stable global financial system. The introduction of the Bretton Woods Agreements (Amendment) Bill will enable Singapore to support the IMF initiative to help low-income countries in times of crisis.

11   Mdm, I beg to move.

Last Modified on 11/07/2016