Royal Elephant Shoots Part 2

Yesterday I wrote about the PAP government’s willingness to bail out the Eurozone with generous contributions to the IMF’s lending facility (http://sonofadud.com/2012/04/25/659/). Yet a US$4 billion loan (which represents more than US$1200 for every Singaporean man, woman and child has seemingly been given without Parliamentary approval or informing Singaporeans beforehand:

As usual, this has all been decided and announced without telling Singaporeans first or debating it in Parliament. The first we got to hear about it was through the IMF announcement on April 20 just as the Spanish people only got to hear about their king’s elephant-hunting jaunts when he was injured.

It is noteworthy that Tharman and our government feel that they can be so generous with our money. Meanwhile we remain in the dark about the real value of our financial assets.  The only thing we can be certain of in addition to death and taxes is that we will never get to spend the assets we and our parents work so hard to put into the state coffers.

In democracies things are very different. In the UK the Chancellor,  George Osborne was forced to defend his decision to commit US$15 billion (which is only about US$250 per UK citizen) in Parliament. He argued he did not need Parliamentary approval because Parliament had previously approved an increased UK commitment to the IMF of £40 billion of which £10 billion remained unused. Nevertheless he was given a rough ride and accused by the Opposition Labour Party of “running scared of Parliamentary scrutiny (http://www.bbc.co.uk/news/business-17794990).

One of the MPs in his own party commented that “We might as well put £10billion in the nearest litter bin.” Other Tory MPs said that they were discussing with lawyers whether the original Parliamentary approval could be revoked.  The unhappiness in the UK is, in spite of the Euro zone market being much more important to Britain than it is to Singapore. The UK has slipped back into a double dip recession for which the coalition government’s austerity policies are largely responsible.  The US$15 billion spent on helping to bail out countries like Spain, which was downgraded again yesterday, could be better spent at home with more effect on stimulating output and employment.

Australia also agreed to a US$7 billion contribution (about US$300 per Australian). Australians on the whole enjoy a higher standard of living than Singaporeans. Yet the Opposition Leader Tony Abbott still said the government should explain why it was making such a large contribution to the IMF, especially as the United States was not making a contribution.

In Singapore our government has as usual shown its disregard for the sovereignty of Parliament by not recalling it to debate the loan. Unfortunately our Parliamentary Opposition has also not raised this issue. The big question is: is the loan constitutional? I would argue that it is not. Under Clause 144 of the Constitution any loans require Parliamentary and also Presidential approval. It has been argued that the Minister of Finance alone is able to approve loans to the IMF without Parliament’s approval under Clause 144(1) b. This gives a specific exemption allowing the Finance Minister to approve increases in Singapore’s quota at the IMF without seeking Parliamentary approval. However it is clear from the text of the IMF’s statement that this loan represents additional commitments over and above the quota increase agreed in 2010:

“There are firm commitments to increase resources made available to the IMF by over $430 billion in addition to the quota increase under the 2010 reform. These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.

“The resources would be channeled through temporary bilateral loans and note purchase agreements to the IMF’s General Resources Account. Should it become necessary to use these resources, adequate risk mitigation features, conditionality, and adequate burden sharing among official creditors would apply, as approved by the IMF Board.” (http://www.imf.org/external/np/sec/pr/2012/pr12144.htm)

I am not a lawyer but it would appear that since this is not a quota increase but a loan it would not be covered by the specific exemption. Therefore it would be unconstitutional unless Parliamentary approval is obtained. It would also require Presidential approval.  The government has not disclosed whether the latter has been obtained.

It would indeed be strange if the Finance Minister alone could approve this loan as there is arguably a clear conflict of interest with Tharman’s role as Chair of the International Monetary and Financial Committee of the IMF.

We need to restore the sovereignty of Parliament as a check on the executive. The PAP government should be required to make the case to Parliament as to why bailing out the generous welfare systems of Euro zone members is more important than looking after Singaporeans.  Instead it can behave with complete impunity and ignore or amend the Constitution at will because there are so few Opposition members in Parliament. This has to change. Until we have a competitive and democratic political system the interests of the broad mass of Singaporeans will continue to be ignored and “inclusivity” will remain a hollow phrase.

About kjeyaretnam

As a blogger I hope to help imagine a model for a New Asian Nation to bring about a free and fair future for Singapore. I'm a Singaporean born and bred and a Cambridge trained economist who could be broadly described as from the Keynesian school. I'm also a successful ex - hedge fund manager and a liberal opposition politician who contested the 2011 General Election with his party. After economics and politics my greatest interests are history, film and makan!

Posted on April 28, 2012, in The market and tagged , , , , , , , . Bookmark the permalink. 6 Comments.

  1. Same concern raised by the Singapore Inflation Association.

    http://www.facebook.com/pages/Singapore-Inflation-Association/224102877629834

  2. the media reported that the loan money to IMF is part of our reserves which could be drawn out anytime by spore?.

    • No the Constitution says quite clearly that any loan needs Parliamentary and Presidential approval. Increases in the IMF quota are exempted but this is not a quota increase as my quote from the IMF itself makes clear.

  3. There is no reason why the Supreme Court cannot hear arguments as to whether the executive has exceeded its Constitutional powers. I am not a lawyer but I do not think we need a separate constitutional court. All we need is for a proper separation of powers.

  1. Pingback: The Truth about that IMF Loan « Reinventing the Rice Bowl

  2. Pingback: An Open Letter to the Minister for Finance « Reinventing the Rice Bowl

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