Singapore’s long-term management of its fiscal reserves has been one that emphasises a prudent and disciplined approach to intergenerational responsibility. The Government operates on a balanced budget rule over the terms of respective parliaments, and it has recently stated that it will only borrow for the purposes of financing large-scale public infrastructure.
Our central concern in this working paper is to examine if the Singapore Government can issue and manage debt for budgetary expenditures while maintaining intergenerational equity. We find that the Government can do so by suggesting a Debt Issuance Framework that specifies how funds raised by debt should be spent and paid back.
We propose that the Government issues S$20 billion in debt per annum from 2021 to 2025, through the issuance of 30-year SGS bonds. A simulation of this Framework for the period 2021-2025 creates additional fiscal space of $16.5 billion to $17.5 billion each year to finance public expenditure in an intergenerationally equitable and fiscally sustainable manner, whilst limiting debt-servicing obligations of the government to below 1 per cent of GDP.
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