Published Date: 09 May 2016 The Monetary Authority of Singapore
1 Minister for National Development, Mr Lawrence Wong, today moved the Bretton Woods Agreements (Amendment) Bill 2016 (the “Bill”) for First Reading in Parliament.
2 The amendments to the Bretton Woods Agreements Act (“BWAA”) will allow the Monetary Authority of Singapore (“MAS”) to enter into arrangements with the International Monetary Fund (“IMF”) to give grants or other financial assistance, on behalf of the Government of Singapore. Safeguards are set in place over MAS’ exercise of its powers.
BACKGROUND
3 Following the global financial crisis, the IMF has scaled up its financial assistance for low-income member countries (“LICs”). In 2009, the IMF’s Executive Board agreed to boost the IMF’s capacity to lend to LICs impacted by the global financial crisis, through a new Poverty Reduction and Growth Trust (“PRGT”).
4 As a highly open economy and international financial centre, it is in Singapore’s interests to support the IMF’s efforts to preserve global financial stability, including through the PRGT initiative. To fund the PRGT, the IMF proposed to members to contribute their profits from the IMF’s sale of part of its gold holdings. With the amendment of the BWAA, Singapore will be able to contribute our share of the IMF’s gold sales profit, which will amount to a grant of US$20.0 million to the PRGT. To date, about 80% of IMF members, including Singapore, have supported this proposal over two rounds of fund-raising since 2012.
KEY PROVISIONS IN THE BILL
Set out powers to give financial assistance, including loans and grants, to the IMF
5 MAS currently has powers to provide loans and interest-free deposits to the IMF. The proposed BWAA amendments will provide MAS with additional powers to make grants, in order to enable MAS to participate in the IMF’s initiative to strengthen PRGT resources. In addition, as the BWAA provides the legal framework setting out MAS’ role as Singapore’s representative and counterparty on all IMF matters, the proposed amendments also consolidate MAS’ existing powers to provide loans and interest-free deposits (currently in the MAS Act) into the BWAA.
Set out strong safeguards when providing financial assistance, including loans and grants, to the IMF
6 To put in place adequate checks and balances, the following safeguards will apply when MAS provides to the IMF any financial assistance, including loans and grants.
7 First, any financial assistance can only be provided pursuant to a specific request from the IMF. In addition, MAS will only agree to a request for financial assistance where there is a collective and broad-based response amongst IMF members. Jurisdictions like Australia adopt such an approach.
8 Second, in the interest of public accountability and transparency, the Minister in charge of the MAS must also publish in the Gazette a statement containing key information about the agreement to extend financial assistance. This statement shall contain a description of the nature and terms of the agreement, and the maximum amount that the MAS has agreed to grant, lend or give other financial assistance to the IMF.
Powers to give grants to the IMF subject to Parliament’s approval
9 As an additional safeguard, the provision of grants to the IMF will be subject to Parliament’s approval, compared to the safeguards for loans or other forms of financial assistance. This is because grants are treated as expenses whereas loans will be repaid at maturity and are recorded as assets in MAS’ balance sheet. Loans to the IMF remain part of Singapore’s Official Foreign Reserves (“OFR”), which are managed by MAS as the central bank.
Provisions for early repayment
10 For loans and other financial assistance such as interest-free deposits made to the IMF, the agreements must include provisions for Singapore to require early repayment in the event of suspension, or premature termination, of the IMF program for which the assistance was intended. This is in addition to the provision over Singapore’s existing loans to the IMF where the IMF is obliged to immediately repay the loan in the event that Singapore has a balance of payments need, which allows loans to remain part of OFR even when drawn.