"Bretton Woods Agreements (Amendment) Bill" – Second Reading Speech by Mr Alvin Tan, Minister of State, Ministry of Culture, Community and Youth & Ministry of Trade and Industry, and Board Member of MAS, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister-in-charge of the Monetary Authority of Singapore, on 3 July 2023
1. Mr Deputy Speaker, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister-in-Charge of the Monetary Authority of Singapore, I beg to move, “That the Bill be now read a second time”.
2. Sir, the International Monetary Fund, or the IMF in short, is a global multilateral institution with a mission to achieve sustainable growth and prosperity for its 190 member countries. It supports economic policies that promote domestic and global financial stability, and foster the economic well-being of countries. To the IMF performs three main roles in furtherance of its mission: (1) economic surveillance, (2) lending to member countries and (3) capacity development.
3. The IMF depends on its members to provide the necessary financial resources to carry out its mission. The primary and permanent source of the IMF’s funds is members’ quotas. This refers to each member’s capital subscription in the IMF that is broadly based on the member’s relative position in the global economy
4. As a small, highly open economy, and a responsible member of the international community, it is in Singapore’s interest to support the IMF’s multilateral efforts to promote financial stability and strengthen the resilience of the global financial and monetary system. Under the Bretton Woods Agreements Act, or BWAA in short, the Monetary Authority of Singapore (MAS) is empowered to enter into agreements on behalf of the Government of Singapore to provide loans, grants or other financial assistance in support of IMF arrangements or programmes. This is subject to safeguards, set out in Section 6A of the BWAA, that ensure the proper exercise of MAS’ powers in relation to this.
Key aspects of the Bill
5. Sir, I will now go through the two main amendments proposed in the Bill.
a. First, the Bill proposes amendments to clarify that the safeguards which relate to grants in sections 6A(2) and (3) of the BWAA are intended to apply to grants provided to help member countries under IMF arrangements or programmes. They are not intended to apply to grants provided to fund the IMF’s offices in Singapore.
b. Second, the Bill proposes amendments to the early repayment requirement in section 6A(4) of the BWAA to take into account: (1) the IMF’s use of standard-form agreements, and that (2) some of its arrangements or programmes cannot be suspended or prematurely terminated.
6. I wish to emphasise that the proposed amendments remain consistent with, and do not detract from, the intent of the existing safeguards in section 6A, which is to ensure the proper exercise of MAS’ powers in relation to the provision of loans, grants or other financial assistance to the IMF. Let me elaborate.
(A) Clarification of the scope of the safeguards in sections 6A(2) and (3) of the BWAA in relation to grants provided to the IMF
7. The first set of amendments relates to the safeguards in section 6A(2) and (3) of the BWAA. These safeguards apply when MAS enters into an agreement to provide a grant to the IMF to support IMF arrangements or programmes with member countries in need.
8. Under BWAA, MAS has provided various grants to the IMF for the purpose. For example, MAS provided three grants in 2021
9. Separately, MAS, on behalf of the Government of Singapore, funds two IMF offices which we host in Singapore. The two offices are:
a. First, the IMF-Singapore Regional Training Institute, or IMF STI in short. This is the IMF’s regional training centre for the Asia and Pacific Region. Its mission is to enhance the economic and policy-making capacity of countries in this region
b. Second, the IMF Resident Representative Office
10. Grants provided to finance the IMF’s offices in Singapore are different from grants provided to support IMF arrangements or programmes which assist member countries in need.
a. When Singapore contributes grants to the IMF to support its arrangements or programmes to assist member countries in need, we depend on the IMF management and Executive Board to ensure proper governance in the administration of the grants. It would therefore be prudent to subject such grants to additional safeguards in section 6A of the BWAA. These safeguards include ensuring that:
i. Any grant provided is pursuant to a specific request from the IMF;
ii. Any grant is provided only as part of a multilateral effort by IMF members;
iii. There is transparency in the form of a Gazette notice covering the key information of the assistance; and
iv. Parliament approves grants by specific resolution.
b. In contrast, grants to finance the IMF’s offices in Singapore support the IMF’s operations and functions in Singapore. The scope of the financing is clearly set out in memoranda of understanding entered into between the Government of Singapore and the IMF. MAS exercises oversight on the use of these funds. In addition, MAS’ financing of the IMF’s offices in Singapore is currently subsumed under MAS’ overall annual budget and approved on a consolidated basis by the President, in accordance with the budget approval process under the MAS Act 1970.
11. The BWAA will therefore be amended to clarify that agreements to provide grants to finance the operations and functions of the IMF’s offices in Singapore are not subject to the safeguards in sections 6A(2) and (3). To be clear, agreements to provide grants to support IMF arrangements or programmes to assist member countries that are in need will remain subject to the safeguards in sections 6A(2) and (3), including the requirement for Parliamentary approval.
(B) Amendment to the early repayment requirement in section 6A(4) of the BWAA
12. The second set of amendments relates to section 6A(4) of the BWAA. These apply when MAS enters into an agreement to provide a loan or other financial assistance (excluding grants) to support an IMF arrangement or programme. Section 6A(4) requires that such agreements include provisions that allow MAS to require early repayment in the event of suspension or premature termination of the IMF arrangement or programme for which the assistance was provided.
13. This early repayment requirement is in addition to existing provisions in MAS’ loan agreements with the IMF, which oblige the IMF to immediately repay the loan in the event of a balance of payment need in Singapore. The intent of the early repayment requirement was to provide additional assurance that MAS would be able to recover its monies from the IMF even if we have no balance of payment need.
14. In practice however, the IMF is unable to accommodate requests from MAS to include this early repayment requirement in IMF arrangements or programmes which are multilateral in nature and use the IMF’s standard-form agreements. The IMF is required to ensure uniformity and equity of treatment for all contributing members and cannot provide for early repayment to any one contributing member, short of a contributing member having a balance of payment need. The IMF has also indicated that certain IMF arrangements or programmes cannot be suspended or prematurely terminated.
15. The Bill will thus amend the BWAA to waive the early repayment provision in theinstances where:
a. the relevant agreement is in a standard form provided by the IMF, which MAS cannot amend unilaterally; or
b. the relevant agreement is for an IMF arrangement or programme which cannot be suspended or prematurely terminated.
16. I would like to emphasise that loans or other financial assistance granted to support IMF arrangements or programmes will continue to be subject to strong safeguards, including the safeguards in sections 6A(2) and (3). There are also further safeguards in relation to loans:
a. First, when Singapore provides a loan in support of IMF arrangements or programmes, Singapore lends to the IMF and not directly to member countries in need. That is, Singapore's loan exposure is to the IMF, not borrowing countries.
b. Second, the IMF enjoys preferred creditor status. This means that loans granted by the IMF will be repaid ahead of all other creditors.
c. Third, as mentioned earlier, should Singapore have a balance of payments need, the IMF is already obliged under our loan agreements to repay the loan to Singapore immediately.
17. Mr Deputy Speaker, in conclusion, as a small and open economy and as an international financial hub, Singapore benefits from global economic prosperity and financial stability. Amidst the uncertain global economic environment and rising geopolitical tensions, the IMF is a key pillar of the multilateral system that fosters cooperation and promotes shared interests in the international financial system. The proposed amendments will enable Singapore to contribute to the work and mission of the IMF as a responsible member of the international community, in a prudent manner that fulfils the intent of the BWAA and ensures the proper exercise of MAS’ powers.
18. Sir, I beg to move.