Singapore’s Public Debt - Asking the Right Question

Public debt is defined as the debt that the government owes.  As of end 2016, our public debt is approximately 105% of GDP.  A significant portion of that public debt issued by the Central Provident Fund, guaranteed by the Singapore government.  The question that should be asked, however, is not who holds the debt, which is the question most people ask.  Even if almost 30% is owed to CPF, CPF is a captive investor and still part of the government.  The question that should be asked is what happened to the money that was borrowed?

Public debt issued results in funds available that must now be spent or invested.  That money has to go somewhere.  We know that since 1990, the government realised cash flow from increasing borrowing to about $250 billion.  This is in addition to a public surplus of $260 billion.  Between 1990 to 2010, this additional public debt and surplus was about 16% of GDP.  The interest on this is also revenue, and we have not even factored that in.  So how much are we talking about?  This is, at least, half a trillion Singapore Dollars.  As per Singapore GDP Data, our GDP was worth USD 292.74 billion in 2015.  That is still less than half a trillion Singapore Dollars.

If we calculate the accumulated realised free cash on the claimed average annual GIC growth of 7% from 1990, we would arrive at just over a trillion Singapore Dollars, more than double the half a trillion Singapore Dollars.  Even a 1% accumulated growth is more than that half a trillion Singapore Dollars.  Properly managed, a 10% ROI is very much achievable, leaving us with $1.5 trillion.

Coming back to that $500 billion, however, people should ask where it is.  Either that money was lost in bad investments, or there are assets under government control that are off public records.  There are no such additional assets under Temasek Holdings or GIC that come close to that valuation.

The line of questioning here is not about fault-finding, or to even suggest any impropriety.  It is about fundamental differences in our philosophy of investment and public spending.  To even have that conversation, we must begin by asking the right questions so that we can have that policy discussion.