Explanatory Brief for Bretton Woods Agreements (Amendment) Bill 2023
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.
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)
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 countries
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 Singapore
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 countries
(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.