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Andrea Ong
Saturday, May 31, 2014

Singapore

CPF monies not used for Govt spending: Ministry

The Straits Times | Andrea Ong | Saturday, May 31, 2014

SINGAPORE - No Central Provident Fund (CPF) monies go towards Government spending as this is prohibited by law, the Ministry of Finance (MOF) said last night.

In a response to queries by The Straits Times, it also reiterated that there is no link between CPF interest rates and GIC returns, even though the latter manages the Government's assets.

MOF was clarifying what the Government does with the money that goes into the CPF and how it determines CPF interest rates, topics hotly debated following online speculation that CPF cash is invested by Temasek Holdings and GIC, and comparisons between their returns and CPF returns.

The CPF Board invests CPF monies in Special Singapore Government Securities (SSGS) issued and guaranteed by the Government.

This is a "solid guarantee", as the Singapore Government is one of the few remaining triple-A credit-rated governments in the world, added the ministry. It also gives the assurance that the CPF Board will be able pay members all their monies when due, as well as the interest that it commits to pay on their CPF accounts.

MOF stressed that government borrowings, whether via SSGS or the market-based Singapore Government Securities, cannot be used to fund its spending, as the reserves protection framework in the Constitution and the Government Securities Act dictate that "monies raised from government borrowings cannot be spent".

MOF said the proceeds from issuing government securities are deposited with the Monetary Authority of Singapore (MAS) as government deposits. MAS then converts the funds into foreign assets via the foreign exchange market.

But as a major portion of these assets are long-term in nature, such assets are transferred to GIC to be managed over a long investment horizon.

"The Government's assets are therefore mainly managed by GIC," said MOF.

As a manager and not the owner of the assets, GIC merely receives funds from the Government for long-term management "without regard" to their sources.

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