Speeches
 Published Date: 08 May 2023

Explanatory Brief for Bretton Woods Agreements (Amendment) Bill 2023

1. Minister of State, Ministry of Culture, Community and Youth and Ministry of Trade and Industry, Mr Alvin Tan, on behalf of Senior Minister and Minister-in-charge of the Monetary Authority of Singapore (“MAS”), Mr Tharman Shanmugaratnam, today moved the Bretton Woods Agreements (Amendment) Bill (“Bill”) for First Reading in Parliament.

2. The Bill will introduce amendments to the Bretton Woods Agreements Act (“BWAA”) which will ensure that the MAS can continue to meet its commitments to the International Monetary Fund (“IMF”) on behalf of the Government of Singapore. 

BACKGROUND

3. The IMF plays a vital role in the global financial system and is responsible for promoting global macroeconomic and financial stability. As part of its mission to foster international financial stability, the IMF provides loans and concessional financial assistance to member countries experiencing actual or potential balance-of-payments problems. The IMF’s main source of funds for lending to members in need is members’ quota subscriptions, which constitute the IMF’s permanent resources. If its quota resources are insufficient, the IMF is able to tap on temporary sources of funding, namely the New Arrangements to Borrow (NAB) and Bilateral Borrowing Agreements (BBAs)If IMF quota resources fall short, the IMF’s next line of defence is the NAB, a multilateral lending arrangement between the IMF and nearly 40 creditor member countries. The IMF has also entered into BBAs with 42 countries, to supplement quota resources..

4. As a highly open economy, a leading financial hub and a responsible member of the international community, Singapore has a strong interest in a strong and effective IMF. Section 4 of the BWAA empowers MAS to subscribe to Singapore’s quota share which is currently SDR3.9 billion (about USD5.5 billion). Section 6A of the BWAA further empowers MAS to provide loans, grants or other financial assistance to the IMF to support the IMF’s lending to member countries facing balance of payments difficulties, subject to meeting the safeguards in section 6A. For example, in response to the 2008 Global Financial Crisis and more recently the COVID-19 pandemic, MAS has contributed to specific IMF trust funds which were set up to assist vulnerable member countriesMAS obtained Parliament’s approval under Section 6A of the BWAA in 2021 to contribute grants to the IMF’s Catastrophe Containment and Relief Trust (US$17.9m); COVID-19 Crisis Capacity Development Initiative (US$2m); and Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries (US$0.97m).. MAS has also joined more than 30 other member countries in making loan commitments to the IMF through the NAB and the BBAsSingapore has made loan commitments of US$1.86 billion through the NAB and US$1.72 billion through a BBA. To-date, the IMF has not drawn upon Singapore’s NAB and BBA commitments.. To-date, the IMF has not drawn upon Singapore’s NAB and BBA commitments.

5. The legislative amendments to the BWAA that this Bill introduces will maintain the intent of the existing safeguards that ensure the proper exercise of MAS’ powers in relation to the provision of loans, grants or other financial assistance to the IMF. The effect of the amendments is to: 

(a) clarify that the safeguards in section 6A(2) of the BWAA are not meant to apply to grants which are given to fund the operations of the IMF’s offices in Singapore; and

(b) waive the requirement for early repayment under section 6A(4) of the BWAA in specific circumstances where the IMF arrangements are multilateral in nature and involve the use of standardised terms.

KEY ASPECTS OF THE BILL

(A) Clarify the scope of the safeguards in section 6A(2) of the BWAA in respect of grants given to the IMF 

6. Section 6A(2) of the BWAA was primarily intended as a safeguard for grants that Singapore provides to IMF programs and arrangements to assist member countries. One of the requirements under section 6A(2) is the need to seek Parliamentary approval, by resolution, to fix the maximum amount of grants to be given to the IMF under each grant agreement. This safeguard was introduced in 2016 when the BWAA was amended to allow MAS to give grants to the IMF, because grants, unlike loans, are not repaid upon maturity. However, this safeguard in section 6A(2)(d) was not intended to apply to MAS’ funding of IMF offices hosted in SingaporeThese are the (i) IMF Singapore Regional Training Institute (STI) which serves as the IMF’s regional training centre for the Asia-Pacific region, and (ii) IMF Resident Representative Office (RRO) which serves as a liaison office between the IMF and Singapore, supporting the IMF's work in Singapore and the ASEAN region.. The funding of IMF offices hosted in Singapore has been subsumed under MAS’ overall annual budget and approved on a consolidated basis by the President as part of the budget approval process, in accordance with the Monetary Authority of Singapore Act. 

7. The Bill will amend the BWAA to clarify that the funding of the operations and functions of the IMF offices in Singapore is not subject to the requirements set out in section 6A(2). The amendments do not affect the existing legislative safeguard of seeking Parliamentary approval for MAS’ grants to IMF programs and arrangements to assist member countries.

(B) Waive the requirement for early repayment under section 6A(4) of the BWAA where specific conditions are met

8. Under section 6A(4) of the BWAA, agreements for loans and other financial assistance provided to the IMF must include provisions for Singapore to require early repayment in the event of suspension or premature termination of the IMF program or arrangement for which the assistance was intended. 

9. In practice, the IMF is unable to accommodate the requirement under section 6A(4) when Singapore participates in IMF arrangements which are multilateral in nature and involve the use of standardised agreements, given the need to ensure uniformity and equity of treatment. 

10. The Bill will amend the BWAA to waive the early repayment provision in limited instances where:

(a) the relevant agreement is in a standard form provided by the IMF, which cannot be amended unilaterally by MAS; or

(b) the relevant agreement is intended to finance a Fund program or Fund arrangement which cannot be prematurely terminated or suspended.

11. Loans granted to the IMF under the BWAA will continue to be subject to strong safeguards. First, when Singapore provides a loan in support of IMF arrangements or programs, Singapore lends to the IMF, not directly to member countries in need. Thus, Singapore's loan exposure is to the IMF, not borrowing countriesSpecifically in the case of the NAB and BBAs, these are loan commitments that take the form of contingent loans to the IMF and are not made directly to countries borrowing from the IMF. The IMF will only draw upon the loan commitments if its other existing resources are significantly reduced. . Second, as the IMF enjoys preferred creditor status, loans granted by the IMF must be repaid ahead of all other creditors. Third, should Singapore have a balance of payments need, the IMF is obliged under our loan agreements to repay the loan to Singapore immediately. 

(C) Align section 5(2) with section 5(1)

12. Under section 5(1) of the BWAA, MAS is allowed to “acquire, hold and deal with” Special Drawing Rights (SDRs) of the Government in accordance with the Articles of Agreement of the IMF, while section 5(2) allows MAS to “buy and sell” these SDRs. The Bill will amend the BWAA to align the modalities referred to in section 5(1) and section 5(2), so that section 5(2) also expressly allows MAS to “deal with” SDRs. This will better reflect the intent of the provisions, which is to allow MAS to contribute SDRs in different ways to enable Singapore to carry out its obligations under any IMF arrangement or program.