THE Government will be able to issue more securities like bonds, after Parliament approved raising the limit of its borrowings from $250 billion to $320 billion.

This motion to increase the limit was passed yesterday.

Explaining the need for a higher amount, Second Finance Minister Lim Hwee Hua said the Government is close to reaching the current ceiling of $250 billion, with more securities likely to be issued.

There are $234.7 billion worth of outstanding government securities, she said, and the amount is expected to hit $320 billion in the next five years.

The increase, she added, is due to growing Central Provident Fund (CPF) balances in members' accounts, which the CPF Board invests in government securities to ensure a certain rate of return.

Bigger CPF balances are a result of policy changes, such as the increase in minimum sum and the new annuity scheme, CPF Life, to build up members' retirement savings, as well as higher CPF interest payments.

This means more money to be invested in government securities, which is the key reason for increasing the limit.

'Three-quarters of the outstanding government securities are expected to be used to absorb these higher CPF members' balances,' said Mrs Lim.

The remainder is for the Monetary Authority of Singapore (MAS) to issue more government securities to enhance the efficiency and liquidity of Singapore's securities markets.

With more government securities allowed to be issued, a Bill was also introduced yesterday to change the current law to allow the early redemption of these securities.

This Bill, which amends the Government Securities Act, will also empower the MAS - Singapore's central bank - to regulate primary dealers, such as banks or securities houses, which can carry out transactions directly with MAS. They are also usually responsible for the distribution of government securities.

If passed, it will also give the MAS authority to enter into arrangements involving the lending of government securities.

This will enable market participants to borrow these securities from the MAS for short periods when they are not readily available from other sources.

Such a move would boost the liquidity and robustness of the government securities market.

This article was first published in The Straits Times.