Government mulls borrowing guarantee to fund massive infra projects

This could finance the KL-Singapore high speed rail and Changi T5.

The government is considering providing guarantees for long-term borrowings made by Statutory Boards and government-owned companies to fund national infrastructure projects, Finance Ministry Heng Swee Keat said in his budget address. 

Borrowing could help spread the cost of large investments over the years and boost the local bond market, Mr Heng added. 

The financing model, which could be applied to build the KL-Singapore high speed rail and the Changi Terminal 5, represents a significant shift for the city-state, according to Bank of America Merill Lynch, as Singapore usually relies on PPPs for its infrastructure development. 

Should the government push through with its plan, it should note that current fiscal rules embedded in the Constitution explicitly prohibit the spending of monies raised from bond issuances even for important infrastructure projects and that this matter even requires presidential concurrence, added BofAML. 

“The mega investments have very lumpy and upfront costs, while the benefits are spread out over the future. Borrowing to spend on such productive items is more equitable from an intergenerational perspective and not necessarily a fiscal slippage,” said BofAML analyst Mohamed Faiz Nagutha.

For Singapore Business Review's full budget coverage, click here.