Mr Leon Perera (Aljunied): Mr Chairman, the reserves consist of various classes of assets held by Temasek, GIC and the MAS, if we are to exclude land banks.
During typical economic crises some asset value such as equities may fall on the whole. This is fairly typical. If a result draw-down is financed by liquidating assets in a time of crisis, this may not necessarily be advantageous for Singapore since it may mean selling fundamentally good assets, such as shares and good blue chip companies, for example, at low prices rather than hanging on to those assets to realise future value when the economy recovers.
However, if the reserves draw-down is financed by borrowing against the collateral of the reserves, that may in some circumstances prove to be more advantages to Singapore, especially given that interest rates may be lower in a time of global economic crisis as central banks slash the cost of credit to financial institutions as they often do. Or is the first line of execution for reserves draw-down utilising cash or cash equivalents held by the MAS or other institutions?
Hence, I would like to use this cut to ask the Government what is the operating principle that determines how reserves draw-downs are financed and executed with these considerations and questions in mind?
And in conclusion, I just like to add that I am aware that during the COVID-19 period, some sectors and some stock exchanges and market indices actually rose. In that sense, this crisis has been atypical. My comments earlier referred to more typical global economic crisis.
Ministry of Finance
26 February 2021