Sunday, April 22, 2012

That US 4 billion to the IMF: Is it unconstitutional?

On 20th April 2012, the Monetary Authority of Singapore announced that Singapore will give a "bilateral loan of US$4 billion to the International Monetary Fund (IMF), as part of the broader international effort to provide the Fund with sufficient resources to tackle crisis and promote global economic and financial stability."

Let me just state at the outset that I am not going to question the wisdom of such a move. I can see the need for the global community to rally together to hold steadfast against any future economic crisis. Some would question whether this is nothing more than an exercise in futility. In fact, in the United Kingdom (where the government has pledged 10 billion pounds), several ruling party MPs have started questioning the wisdom of providing such a backup to the IMF. Peter Bone (MP from the Conservative Party) said: "We might as well put £10billion in the nearest litter bin.” There is a sense in which this move is seen as money down the drain and an exercise in futility even if it may appear to be well-intentioned.

The Shadow Chancellor, Ed Balls (of the opposition Labour Party) had this to say: "The IMF has a vital role to play in the global economy and should have the resources to do that job, but it should not be bailing out the eurozone when the euro area countries are not doing their own bit to help themselves." "The IMF cannot and should not become the de facto central bank of the euro area." "The IMF is being put up to step in and play the role that the European Central Bank should be playing - a strategy which cannot work and is self-defeating by highlighting the lack of a proper ECB firewall." I can see the validity in this proposition that IMF should not do ECB's job.

Meanwhile, back in Singapore, we have mundane news reports of a mere 4 billion US dollars being pledged to the IMF. I am rather curious about the status of this loan commitment from a legal standpoint. Under our Constitution, there are some restrictions on loans and guarantees provided by the government. Article 144 of the Constitution is as follows:

Article 144.
—(1) No guarantee or loan shall be given or raised by the Government —
(a)except under the authority of any resolution of Parliament with which the President concurs;
(b)under the authority of any law to which this paragraph applies unless the President concurs with the giving or raising of such guarantee or loan; or
(c)except under the authority of any other written law.
(2) The President, acting in his discretion, may withhold his assent to any Bill passed by Parliament providing, directly or indirectly, for the borrowing of money, the giving of any guarantee or the raising of any loan by the Government if, in the opinion of the President, the Bill is likely to draw on the reserves of the Government which were not accumulated by the Government during its current term of office.

The present issue of the loan to IMF comes under Clause 1(b). The Constitution makes reference to specific laws under which loans may be given and one such statute listed at Clause 3 is the Bretton Woods Agreement Act (Cap 27). Subscription payments to the IMF and other monetary commitments to the IMF are covered by the Bretton Woods Agreement. Given this fact, the Constitution clearly prohibits at Clause 1(b) above any loan given to the IMF without the President's consent.

I wonder if the President was consulted. I wonder if he has given his consent. Given that this is one of the areas of the President's discretionary powers and given the fact that he is an Elected President, I would expect some transparency and accountability here simply in the form of an official request for the President's consent and the President's communication of such consent with reasons stated. This would ensure that the people can judge the President's record when it comes to the next Presidential Election. What decisions did he make in relation to his discretionary powers? How did he justify those decisions? Are the justifications acceptable? These are important questions and can't be brushed aside on the bare assertion that our President is like the Queen of England and that he carries out his functions behind closed doors. Our President is Elected (and not appointed or a hereditary title holder) and these are part of his discretionary powers for which he was elected.

Thus I have 2 issues with the current loan to the IMF. (1) A guarantee or a loan without the President's consent will be unlawful. (2) If the President has consented, can we have an official statement from Istana?


The Pariah said...

1. 2009 (just pre-G20 summit): Spore hiked IMF contribution from US$0.5bn to US$2bn.

2009 MOH Budget was S$2bn (S$, NOT US$).

2. 2012: Singapore's IMF contribution is doubled from US$2to US$4bn.

2012 MOH Budget is S$4.72bn, out of which Op Exp is S$4.08bn and the balance is for Dev Exp.


Anonymous said...

I think it is just a pledge. Like those many countries gave to humanitarian crises but eventually never followed thru. Guess if IMF wants to drawdown our share, parliament would have to give green light formally.

Anonymous said...

The pledge of US$4 billion is from the Lee family? That's why, no need to go the president or parliament!

The Pariah said...

@ Anonymous: "Pledge" is a contribution that can be drawn down by the IMF at any time thereafter.

Presidential approval must be obtained UPFRONT at the time of "pledge" - similarly, corporations capture "contingent liabilities" IN balance sheet (not OFF balance sheet).

Otherwise, our President will be locked into "fait accompli" position to say "yes" upon IMF drawdown if Singapore is NOT to renege on its international commitment - for whatever is the worth of "integrity" these days.

So what happened to the 2009 "pledge"? Was it drawn down in the Wall Street meltdown? If drawn down, what happened thereafter?

Transparency? Accountability?
Buzzwords of our First World PAP Govt no less.

Anonymous said...

Just shows the priorities of the government are misplaced. Won't be surprise a reason for the new cpf policy too. If the government think they have so much money to pledge then they should return our cpf money to us.

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