Proposed SINGA bonds unlikely to affect credit rating: OCBC

The government plans to borrow $90b for infrastructure projects, the highest amount of potential borrowing in three decades.

Parliament introduced a bill that would allow the government to borrow up to $90b for infrastructure projects.

Projects funded by bonds issued from the proposed Significant Infrastructure Government Loan Act (SINGA) act will have to have an operational life-span of at least 50 years, be important to the national interest, and will be developed in the next 15 years.

"There is a need to implement these lumpy projects over the next decade or beyond, but the fiscal position may be relatively tight to start with, after two consecutive years of fiscal deficit and significant tapping of past reserves to fund the Covid-19 support measures since 2020," OCBC Treasury Research said in a statement.

These projects include the Cross Island Line and Jurong Regional Line publilc transport initiatives, and the Deep Tunnel Sewerage System.

It has been more than three decades since Singapore last borrowed to pay for infrastructure projects. Despite this, OCBC said this would not affect Singapore's international credit rating.

"First, there are clear safeguards for the SINGA program with very well-defined and tightly managed criteria for what qualifies for SINGA. This should give reassurance to market that Singapore’s fiscal position and financing framework remains robust. Second, the supply of SGS (Infrastructure) and SGS (Market Development) will be managed holistically calibrating to demand, which should reassure investors that there would not be any supply indigestion when the first issuance of SGS (Infrastructure) comes to market in 4Q21," OCBC said.

The Monetary Authority of Singapore is expected to release the first tranche of these bonds before the end of the year.