IS DEBT/GDP RATIO A RELIABLE INDICATOR OF A COUNTRY’S ECONOMIC HEALTH

 

Part 2: Why is Singapore able to sustain a Debt/GDP Ratio of 177%% without economic collapse or significant devaluation of the Singapore Dollar?

Table 1: 

Table 2: Singapore's Balance Sheet

In Singapore’s case, what looks like a towering gross-debt ratio of 177% is really the liability leg of a much larger sovereign wealth portfolio. Because the assets are liquid, diversified and earn returns, and because constitutional rules forbid using borrowed money for current spending, markets treat Singapore’s “debt” more like sovereign investment units than true financing of deficits. Add a structural current-account surplus and large FX reserves, and there is little reason for bond or currency panic.

1 Borrowing is only for investment, not spending

• Under the Government Securities Act (GSA) and the Constitution, most bonds are issued to meet CPF demand or build a risk-free curve; proceeds are transferred to MAS and GIC for investment. mof.gov.sgmof.gov.sg
• Day-to-day budgets must balance over each parliamentary term. mof.gov.sg

2 Sovereign assets far exceed liabilities

• Combined GIC + Temasek + MAS reserves ≈ S$ 2 trn (~280 % GDP), dwarfing gross debt.
• Net debt is therefore negative: Singapore is a large public-sector creditor, not a debtor.

3 Stable domestic funding via CPF and local institutions

·        70 % of outstanding debt is Special SGS bought by the CPF, Singapore’s compulsory pension scheme—an in-country, captive, very sticky investor base.

• Remaining marketable SGS and MAS bills are coveted collateral in the local money market, keeping yields low despite volume.

4 Formidable external buffers

• Official reserves > US $ 380 bn (S$ 518 bn) and a current-account surplus of 17.5 % GDP (2024) shield the currency and the banking system. tradingeconomics.com
• MAS can defend the SGD and absorb liquidity shocks without selling government assets.

5 Credible policy frameworks

• The Monetary Authority of Singapore’s long-standing basket-band-crawl exchange-rate regime, backed by large reserves, has kept inflation and the SGD remarkably stable.
• Singapore holds an AAA sovereign rating from all major agencies, reflecting political stability and the legal ring-fence around past reserves.

6 Investment returns pay the bill

• Up to 50 % of long-term real returns on MAS, GIC and Temasek portfolios (the NIRC—~S$ 23.5 bn in FY 2024) flow into the annual Budget, offsetting servicing costs and funding social spending. gic.com.sg
• Cash coupons on CPF-related debt are effectively recycled within the public sector.

7 Prudent fiscal culture & high private savings

• Singapore consistently runs medium-term primary surpluses and keeps operating expenditure in check.
• A household savings rate in the mid-to-high teens provides deep domestic capital and cushions demand for government paper.

So, Singapore actually has negative net debt. See Table 2: Singapore's Balance Sheet above