My admiration for Singapore is mainly due to the way in which the whole country is financed intelligently and sustainably.
In particular, the way in which the government – by laws that has been imposed on itself – does not allow spending in deficit and has to accumulate surpluses, which are profitably invested through the Singapore Monetary Authority (MAS), GIC and Temasek Holdings.
The last of the three just reported record returns of 24.5 percent for the year ending March 31, 2021, driven by stock market rallies driven in large part by global stimulus packages released to economies affected by the COVID-19 crisis.
This has raised the total value of the portfolio from $ 306 billion to $ 381 billion and the increase is likely to continue as governments around the world issue fiscal and monetary measures to avoid deeper economic problems, with much of the background. pushing stock markets more and more.
In other words, after decades of prudent financial planning and state investment, Singapore is making money while others are desperately trying to save themselves from collapse.
Temasek’s shareholder return of $ 75 billion alone is more than the total amount of $ 53.7 billion in the local relief spending packages approved in 2020 and 2021, which boost the economy by avoiding restrictions, helping Singapore companies weather the pandemic storm.
Pore has earned $ 235 million in reserves at MAS, Temasek
That’s not all. Although COVID-19 shook the world, Singapore’s foreign reserves under MAS management have increased by A $ 160 billion.
At the end of 2019, total official foreign reserves amounted to A $ 375 billion, up to US $ 478 billion at the end of 2020 and € 535 billion in June 2021.
In total, Singapore has earned reserves of US $ 235 billion in these two entities (MAS and Temasek Holdings).
Even if we subtract the ca. 54 billion Australian dollars that was to be allocated to assistance packages in 2020 and 2021, still increase to 181 billion Australian dollars, and this even without GIC publishing its results (which is expected at the end of this but), which are likely to be equally strong, as they are driven by the same underlying causes.
Although we do not know the exact amount under GIC management, the net impact on reserves is also mandatory in at least tens of billions of dollars.
As a result, even if we count all the economic pains suffered by the pandemic and the massive spending the government had to use to support the country, the city-state is easily richer than the US $ 200 billion. that before COVID-19 reached world.
Of course, there is a warning. These gains are not necessarily permanent and may fluctuate depending on the international situation and the demand for Singapore dollars.
However, this also highlights the simple genius of Singapore’s reservation system. It is designed to not only produce healthy, consistent long-term returns, but its diversified investments act as buffers, balancing the impact of negative external events.
However, it will not be disadvantaged regardless of economic conditions
Due to a strong combination of equities (for high growth) and government-issued securities such as bonds (for security and stability), along with a strong currency, a global net creditor status is say, Singapore is a creditor of other countries and does not) have external public debts to worry about), there is hardly a situation where the city-state is bad.
If the world economy is good, it is obviously also good for Singapore.
If the world economy is bad, but countries use fiscal and monetary measures to stimulate their economies (as is currently the case), Singapore yet profits from foreign investment, even if domestic GDP is suffering temporary success.
The icing on the cake is the fact that Singapore has no external public debt to talk about (as it cannot apply for loans to finance budget deficits) and has now added another tool to make the most of its financial strength.
Under the recently approved LION, the government can ask for up to 90 billion US dollars to finance long-term infrastructure investments, which is actually cheaper than if it wanted to develop part of its reserves to do so. You would lose more on the loss of return on investment than you have to pay lenders.
In other words, even when on loan, Singapore actually makes more money than if it didn’t.
Unlike other countries, which are now taking on immense debt levels, pushing the burden of their repayment on future and aging generations, Singapore uses debt to optimize the returns on its various investments and be even more resilient to global crises. .
In this particular pandemic of Covid-19, it has not made the country weaker, but richer than ever.
Featured Image Credit: Edgar Su via Reuters