The Singapore government – without consultation with CPF members – legislated CPF retirement savings as state reserves for GIC to manage; 100% converted to foreign currencies, invested overseas.
Every year, more than S$30 bil (net increase, contribution less withdrawal) is converted to foreign currencies and invested in their respective countries.
This conversion – happening over decades – effectively weakens the Singapore dollar. The actual value of the Singapore could possibly be much higher, S$1 = US$1.
WP MP Jamus Lim seems to be aware of this and mentioned the abnormally weak SGD – linking to GIC’s management of our reserves – in one of his FB post 2 years ago:
“But if the MAS wants to keep the exchange rate undervalued, it’ll supply more Sing dollars to the market. The upshot is that these are exchanged for foreign currency, which leads to a buildup of reserves. So we only end up with too much reserves—which makes the transfers to GIC necessary—when our exchange rate is routinely weaker than it needs to be. And since 1970, this rate—adjusted for inflation and our trade—has remained roughly the same. But does it need to be? I don’t think so, and I think that MAS can allow the Sing dollar to get stronger. While this does mean that GIC ends up with less reserves to manage, it also means that we keep more purchasing power in the hands of the Singaporean consumer.”
(20+) Jamus Lim – For most of us, exchange rates are an exotic topic,… | Facebook
According to a 2019 ST article, Singapore was reported to have been added to US watchlist for currency manipulation. Singapore added to US watch list for currency manipulation | The Straits Times
ST: “The US report says Singapore should undertake reforms that will lower its high saving rate and boost low domestic consumption, while striving to ensure that its real exchange rate is in line with economic fundamentals, in order to help narrow its large and persistent external surpluses.” Singapore’s high saving rate is the result of legislating a high percentage of CPF which is mostly channeled into housing. The US report strongly suggests the misalignment of the Singapore dollar with economic fundamentals.
In conclusion, it is clear that the strength of the Singapore dollar has been artificially depressed via our CPF policy. If our currency is aligned with economic fundamentals, why should the government fear currency speculators targeting the Singapore dollar during times of volatility? To prevent speculation, why not stop manipulating the Singapore dollar?
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