The debt is easily explained and there shouldn’t be any reason to panic yet…

The bulk of the Government debt are in the form of security bonds called Singapore Government Securities and the Central Provident Fund Board (CPF) is the main holder of these bonds. Hence we can say that Singapore Government do not really owe other countries or private entities any debt but they owe CPF quite a substantial amount of money. Why then, does the Government need to borrow so much money from CPF?

The answer is an ingenious plan by the Government to create a money flow cycle to fund public housing. CPF was created as a pension funds that belongs to the contributors (Singaporean & PRs) and not the Government. In order for the Government to use the fund in CPF, they have to ‘borrow’ from it. The houses were then sold to the people at a comfortable rate to repay the debt and interest owed to CPF board. The cycle continues to present day and as the Government spends more on public housing, it borrows more from CPF and that explains the high national debt owed domestically and not externally.

We can now see that the huge Government debt is no cause for alarm. However, what the Government should do better is communication. Without explaining the details of the debt, people – including the good economics professor from China’s “BeiDa” – would not know the intricate details of the funding model for our public housing project and would therefore be misguided by statistics & confused.