The contest is Government
can get cheap source of fund at below 2.5% in the open market given Singapore’s
credit rating.
Authorities may say that
they can borrow at below the existing 2.4 to 2.5% CPF rate. Some may agree with
the Government given Singapore’s strong credit ratings.
This is especially in the
case where Singapore borrows only 10% of 20% of GDP.
But what is unclear is if
Government were to borrow 100% of our GDP (Our existing debt levels), the
credit ratings of Singapore will quickly fall, leading to very high borrowing
rates.
In fact, it is not new to
commoners that Singapore and Japan enjoys reasonable credit rating because the
national debt is internal. One would argue that local Japanese and Singaporeans
will not exit Japan and Singapore respectively, immediately.Polices can also be
put in place to guard the exit.
As such, it may be unfair
for Government to claim that CPF is not providing a cheap source of funds.