“Chris Kuan – hi bro, no offence. We are older folks not much theory savvy, but we do believe straightforward is always more correct than beating around the bush…………… Assuming, as you mentioned, govt’s Statement of Assets and Liabilities is correct, can you advise whether PAP government is able to repay S$161k + S$40.5k to each batch of citizens at 55? Serious question. Can PAP government repay, having looked at the govt’s Statement of Assets and Liabilities? Look forward to your answer. Thanks.”
The writer takes no offense whatsoever. Many are confused about the social media allegations that CPF cannot be repaid in its entirety because GIC has squandered away the monies in bad investments.
A straightforward explanation is indeed always the best. So the writer makes a simple explanation of the assets and liabilities of the government. In so doing, the “undisclosed” reserves managed by GIC will also be shown (try to spot it). Those convinced government financial statements are complete fabrications should look away.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is an appendix to the Budget financial information package (and would have been delivered to the IMF). The crucial line items are under Liabilities – the Government Securities Fund and the General Balance.
http://www.tremeritus.org/wp-content/uploads/2015/08/Capture34.jpg?f5435c
The Government has $834b of financial assets (excluding assets held by Fifth Schedule entities such as MAS and Temasek, GIC holds no assets) and this is managed by GIC. However the entire amount is not the reserves.
Liabilities are what the government owed to government bond holders and to various Funds and Endowments in which spending commitments from the budgets are not yet disbursed, therefore continued to be held by the government and invested.
The line item Government Securities Funds denotes the government’s obligation to bond holders. This shows $401b provision, i.e. set aside, for debt of which $260b are Special SGS invested by CPF.
The line item General Balance is the difference between total assets and total commitments, i.e. the above-mentioned funds, endowments and the obligation to debt holders. This is recorded under the Consolidated Fund which, according to the Parliamentary Glossary is analogous to a “bank account” where revenues are paid in, expenditures are paid out and the balance of $254b reflects the excess monies. That is to say the government has more assets than its commitments by $254b.
Not only is the $401b owed by the government to bond holders (who include CPF) already set aside and backed by assets, but the government has $254b more assets than what it owes.
So to answer @ never trust pap !!, government is much more than able to repay S$161k + S$40.5k to each batch of citizens at 55.
The Spending Wayang
$154b of liabilities are commitments to Funds (e.g. Development Fund) and Endowments (e.g. Edusave, Comcare). This shows expenditures in the budget especially those targeted at social transfers, are not the same as actual disbursements because disbursements are staggered over a long period of time or only the returns in Endowments are spent. This explains the vast difference between the expenditures announced by the government and the actual disbursements given to recipients.
Finance the weapon of choice
The allegations that GIC has squandered away CPF monies do not hold up to minimum scrutiny of simple portfolio-level analysis anyway. This show GIC is a conservative asset manager whose risk-adjusted performance is exactly on par with Norway’s GPF. It is implausible that CPF is all squandered.
That the government refused to repay CPF in full at the age 55, has always had little to do with investments but everything to do with politics;
Minimal expenditures on social spending and social transfers, e.g. pensions, healthcare
Maximum accumulation of reserves whose returns provide total flexibility in ad hoc, discretionary spending
Minimum interference from fiscal trade-offs, e.g. no pressure from mandatory social entitlements to balance other expenditures such as defence.
Maximum leverage over voters by depleting their CPF and in old age hand out social spending in drips and drabs.
In the political battlefield, finance is the ultimate weapon. Non-prejudicial access to information would have allowed knowledgeable opposition parties to precisely craft more citizen-friendly socioeconomic policies that provide voters with an alternative. Vote wisely if one wishes the government’s riches to serve the citizens than to pay for weapons, vanity projects and obscene minister and civil servant salaries.
Chris Kuan
* Chris was regional head of capital markets for Asia Pacific until his retirement. He writes opinions and commentaries mostly on economic and financial matters.
The writer takes no offense whatsoever. Many are confused about the social media allegations that CPF cannot be repaid in its entirety because GIC has squandered away the monies in bad investments.
A straightforward explanation is indeed always the best. So the writer makes a simple explanation of the assets and liabilities of the government. In so doing, the “undisclosed” reserves managed by GIC will also be shown (try to spot it). Those convinced government financial statements are complete fabrications should look away.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is an appendix to the Budget financial information package (and would have been delivered to the IMF). The crucial line items are under Liabilities – the Government Securities Fund and the General Balance.
http://www.tremeritus.org/wp-content/uploads/2015/08/Capture34.jpg?f5435c
The Government has $834b of financial assets (excluding assets held by Fifth Schedule entities such as MAS and Temasek, GIC holds no assets) and this is managed by GIC. However the entire amount is not the reserves.
Liabilities are what the government owed to government bond holders and to various Funds and Endowments in which spending commitments from the budgets are not yet disbursed, therefore continued to be held by the government and invested.
The line item Government Securities Funds denotes the government’s obligation to bond holders. This shows $401b provision, i.e. set aside, for debt of which $260b are Special SGS invested by CPF.
The line item General Balance is the difference between total assets and total commitments, i.e. the above-mentioned funds, endowments and the obligation to debt holders. This is recorded under the Consolidated Fund which, according to the Parliamentary Glossary is analogous to a “bank account” where revenues are paid in, expenditures are paid out and the balance of $254b reflects the excess monies. That is to say the government has more assets than its commitments by $254b.
Not only is the $401b owed by the government to bond holders (who include CPF) already set aside and backed by assets, but the government has $254b more assets than what it owes.
So to answer @ never trust pap !!, government is much more than able to repay S$161k + S$40.5k to each batch of citizens at 55.
The Spending Wayang
$154b of liabilities are commitments to Funds (e.g. Development Fund) and Endowments (e.g. Edusave, Comcare). This shows expenditures in the budget especially those targeted at social transfers, are not the same as actual disbursements because disbursements are staggered over a long period of time or only the returns in Endowments are spent. This explains the vast difference between the expenditures announced by the government and the actual disbursements given to recipients.
Finance the weapon of choice
The allegations that GIC has squandered away CPF monies do not hold up to minimum scrutiny of simple portfolio-level analysis anyway. This show GIC is a conservative asset manager whose risk-adjusted performance is exactly on par with Norway’s GPF. It is implausible that CPF is all squandered.
That the government refused to repay CPF in full at the age 55, has always had little to do with investments but everything to do with politics;
Minimal expenditures on social spending and social transfers, e.g. pensions, healthcare
Maximum accumulation of reserves whose returns provide total flexibility in ad hoc, discretionary spending
Minimum interference from fiscal trade-offs, e.g. no pressure from mandatory social entitlements to balance other expenditures such as defence.
Maximum leverage over voters by depleting their CPF and in old age hand out social spending in drips and drabs.
In the political battlefield, finance is the ultimate weapon. Non-prejudicial access to information would have allowed knowledgeable opposition parties to precisely craft more citizen-friendly socioeconomic policies that provide voters with an alternative. Vote wisely if one wishes the government’s riches to serve the citizens than to pay for weapons, vanity projects and obscene minister and civil servant salaries.
Chris Kuan
* Chris was regional head of capital markets for Asia Pacific until his retirement. He writes opinions and commentaries mostly on economic and financial matters.
