Keeping half of Singapore's earnings from its reserves is important as it signals to currency markets "the strength of the Singapore dollar", Minister in the Prime Minister's Office Chan Chun Sing said on Saturday (Feb 24).
The strength of the Singapore dollar allows Singaporeans to “enjoy many things”.
“For example, we can import goods and essentials more affordably. We can also go on holidays more affordably. People are also coming here to work and earn our Sing dollar,” he said.
”But if the Sing dollar is weak, we will also see the opposite of these very examples I’ve mentioned. We should not take the use of our reserves lightly.”
Mr Chan said he would not “go through the math of this strategy”.
“Suffice to remember that every dollar we save and put back into the reserves will help us earn more to meet the needs of future generations. This is especially when our population is not growing as fast and when our population ages. On the other hand, for every dollar of earning we spend now, will mean more than one dollar plus investment returns less, for the next generation.”
Another “important reason” for the Government’s position:
“How much we spend and how much we save will also signal to the currency markets what they can expect the strength of the Sing dollar to be,” Mr Chan pointed out.
“If the world thinks we are running an irresponsible or unsustainable fiscal policy, you can well imagine what they will do to the Sing dollar,” he added. “If the world does not believe in the strength and stability of the Sing dollar, you can also well imagine what will happen to our savings and our reserves.”
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