Singapore is taken into account the country with the most important foreign debt in Southeast Asia, and even ranks 4th on the earth.
Singapore’s external debt to GDP ratio is 167.9%, while Brunei has the bottom external debt to GDP ratio at just 2.3%.
According to the IMF, the protected limit for the foreign debt ratio is 60% of GDP. Therefore, Singapore has high levels of debt.
In the case of a rustic, very high levels of debt may make it difficult to repay. But is Singapore experiencing this?
In fact, that is what the country is like still capable to keep up a balanced budget.
According to the official website of the Government of Singapore, although Singapore’s gross debt to GDP ratio appears to be very high, it doesn’t consider Singapore’s significant asset position.
The Singapore government is financially sound because its assets far exceed its net debt. This is reflected within the investment income earned from reserves, which the federal government can use for spending as a contribution to the online investment return.
The strong financial balance sheet has also led to Singapore being rated AAA by three leading rating agencies (S&P, Moody’s and Fitch). Countries with this rating are considered to have one of the best ability to repay their debts to investors. As a result, investors are inclined to perceive investments within the debt of AAA-rated countries as protected and low-risk.
The Singapore government also doesn’t borrow money for current expenses. Instead, it issues debt for specific long-term purposes.
These aspects explain why Singapore has not experienced financial default despite its high debt levels.
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