Posted by Gregor Gregersen on 26 Dec 2023

Why Singapore’s Debt is Often Misunderstood


Singapore is frequently misunderstood in terms of its national debt. The city-state has no net debt. Yet, media portrayals, authoritative sources included, typically focus on Singapore's gross debt figures, painting a picture of significant indebtedness. In their bid to rank countries by their government debt or debt-to-GDP ratios, these sources often misrepresent Singapore's fiscal strength by ranking it high against other countries that have high gross debt.

For example, Singapore is ranked 5th in terms of its debt-to-GDP ratio on the International Monetary Fund (IMF) Central Government Debt webpage. Similarly, Singapore is ranked 4th and 6th in the CIA World Factbook and by the World Bank, respectively, when only debt-to-GDP is considered.

In addition, the World Debt Clock website shows Singapore's national debt ticking upwards in large font, showing it having a debt-to-GDP of 174%.

It is no wonder then that many people go away thinking that the Singapore government debt is one of the highest in the world, right up there with countries such as Eritrea, Greece, Barbados, Burundi, and Lebanon.

However, this perspective on Singapore's debt is misleading as it fails to account for the nation's true fiscal strength.

The Singapore Government Runs a Balanced Budget 

Before we look into Singapore's gross debt, it is important to understand that the Singapore Government is constitutionally required to have a balanced budget over each 5-year government term. Therefore, what the Singapore Government spends is always equal to or less than what the government earns or receives.

"By living within our means, we seek to accumulate a modest budget surplus wherever possible, putting aside something in good years so that we have some savings to draw upon in bad years. This buffer allows our government to run deficits when there are global economic restructuring imperatives, threats to national security and other challenges, while preserving the long term financial security of Singapore."
- Ministry of Finance

The Singapore Government's strategy is simple: Prudent spending and saving surpluses in good years help with deficits incurred in challenging years for the Singapore economy, such as the SARS outbreak in 2003 and the more recent COVID-19 pandemic between 2020 and 2022.

Despite  ranking Singapore 4th in terms of public debt, The Central Intelligence Agency (CIA) Factbook acknowledges that "the (Singapore) government has not borrowed to finance deficit expenditures since the 1980s; Singapore has no external public debt."

What Constitutes Singapore's Gross Debt

The problem with ascertaining Singapore's debt using only gross debt is that only the liabilities are considered when looking at the country's balance sheet, and the assets are ignored. However, before we even delve into Singapore's assets, it is also important to understand how Singapore's gross debt differs greatly from most countries.

What  Gross Debt Represents in Most Countries

Gross debt in most governments represents the accumulation of past spending deficits. 
For example, in FY 2023, the United States collected $4.44 Trillion and spent $6.13 trillion, resulting in a $1.70 trillion deficit, which, together with past deficits, resulted in over $33 trillion of accumulated debt. When divided by the GDP, this results in the reported ~123% debt-to-GDP ratio.

What Gross Debt Represents For Singapore

Singapore's gross debt comprises Singapore Government Securities (SGS), Special Singapore Government Securities (SSGS), Singapore Savings Bonds (SSB), and Reserves Management Government Securities (RMGS).

Each of these securities serves a different purpose:

Under the Government Securities Act, the Singapore Government cannot spend monies raised from these securities. Instead, these borrowing proceeds are invested with Singapore's sovereign wealth funds.

So, while these monies are 'borrowed' by the government and are owed to individuals, the Central Provident Fund and the Monetary Authority of Singapore, it is not used to fund government expenditure. Remember, that the Singapore Government already runs a balanced budget apart from monies from these government securities.

In addition, this debt is owed by the Singapore government to the country's citizens, not foreign investors or institutions. This is unlike other governments that issue bonds (e.g., treasury bills) to fund expenditure.

Nevertheless, this debt is recorded as gross debt by the IMF.

Singapore Has Strong Fiscal Reserves

Singapore Has Zero Net Debt

When Singapore's assets are considered, the country is a net creditor with no net debt. The Singapore Government has a strong balance sheet with assets well in excess of its liabilities. This is why international credit rating agencies like Fitch, Moody's, and Standard & Poors give Singapore the highest short-term and long-term credit ratings of AAA.


Singapore Receives Regular Income From its Sovereign Wealth Funds

Unlike most governments, which have to pay interest on debts, Singapore receives large and growing incomes from its Sovereign Wealth Funds. A portion of these funds are re-invested into the funds, and a portion is used for various governmental projects. In FY 2023, Singapore received about S$21.6 billion in such net investment returns, representing about 3.3% of GDP. 

Singapore's "Gross Fiscal Reserves," which represent accumulated surpluses, transfers (e.g., from the pension system), and investment returns represent between 200% to 300% of Singapore's GDP.  By netting out the IMF-reported "gross debt" (168% of GDP) with Singapore's Gross Fiscal Reserves (200% to 300% of GDP), we obtain estimates of Singapore's Net Reserves being 32% to 132% of GDP. 

Singapore's fiscal reserves are managed by its Sovereign Wealth Funds (Temasek Holdings and GIC) as well as its central bank, the Monetary Authority of Singapore (MAS). Whereas Temasek and MAS transparently report their holdings, the GIC Sovereign Wealth Fund's assets are kept as a closely guarded secret, resulting in Fitch's estimating the reserves widely from 200% to 300% of GDP. Singapore's solvency and reserves can be easily verified, especially via sovereign credit rating agencies  such as Fitch:

“Substantial Fiscal Net Asset Position: Singapore has very large fiscal reserves, which Fitch estimates to be around 200%-300% of GDP, reflecting decades of fiscal surpluses and returns on assets.“
Fitch Affirms Singapore at 'AAA'; Outlook Stable, July 20th, 2023

Singapore's Debt is Often Erroneously Misrepresented

It is disappointing that many authoritative sources have grossly misrepresented Singapore's fiscal position, making such rankings and depictions superficially simple. Instead of providing the public with high-quality information, they have maligned one of the most fiscally responsible countries in the world.

Singapore's responsible and sustainable approach toward prosperity rests on the foundational mantra of living within one's means and having the will to enforce this belief - a feat rarely seen in the global economy, given how highly indebted many countries are today.

Singapore is one of the most wealthy countries in the world, often called a 'miracle' given that the small city-state has no natural resources. Yet, the nation has become an important financial center, attracting billions of foreign investment funds and international companies setting up shop on its shores. It is well-known for its political stability and the strength of its currency, the Singapore dollar. These factors have led to Singapore becoming one of the world's safest countries. Unbeknownst to many, Singapore has the best modern military force in Southeast Asia due to the government's decades of defense spending to safeguard the country's interests.

This is why Silver Bullion operates exclusively in Singapore and believes that the country is one of the best places to store precious metals safely.

Watch Gregor Gregersen Explains the Misrepresentation of Singapore's Debt