(MCOM 8) SDR + SG's BOP + role of transport in BOP

SDRs

what are Special Drawing Rights (SDRs)?

• SDRs are international reserve assets created by IMF to supplement the official foreign currency reserves of its member countries

• SDRs are not money but they can be exchanged for real currencies between countries

SDRs

how are SDRs allocated?

based on their quota subscription economic size

SDRs

what determines the value of one SDR?

value of an SDR is based on the average worth of five major currencies: Yuan, Euro, Pounds, Yen, and US Dollar

SDRs

how much is 1 SDR worth in US dollars (June 2025)?

1 SDR = US$1.3671

SDRs

how do countries use SDRs?

• a country facing BOP problems can exchange SDRs for usable currencies

• it can strengthen its foreign reserves without borrowing from external markets

• helps reduce reliance on expensive foreign loans

SG’s BOP account (2020-2024)

how is SG’s current account balance?

• remained strong throughout this period, consistently showing a surplus

• volume of export is higher than import shown by positive Visible Account (Balance of Trade) and positive Invisible Account (Balance of Services)

SG’s BOP account (2020-2024)

how is SG’s capital and financial balance?

• capital and financial account saw significant swings reflecting SG’s role as a global financial hub

• volume of funds inflow is higher than outflow, shown by positive capital and financial balance

SG’s BOP account (2020-2024)

how is SG’s official foreign reserves?

• SG’s official foreign reserves (OFR) grew steadily, reflecting persistent current account surpluses and capital inflows

• reserves remained high maintaining financial stability and managing external shocks

role of transport and shipping in BOP - current account

what does export of shipping services involve?

• when a country provides transport services to foreign companies or residents, it earns foreign exchange

• recorded as a credit (inflow)

• invisible account

role of transport and shipping in BOP - current account

what does import of transport services involve?

• when a country uses foreign ships or transport services it pays overseas providers

• recorded as a debit (outflow)

• invisible account

role of transport and shipping in BOP - current account

what does maritime and port-related earnings involve?

• revenue from port charges, pilotage, stevedoring, bunker fuel sales, and ship repair services provided to foreign vessels also adds to service exports

• recorded as a credit (inflow)

• invisible account

role of transport and shipping in BOP - current account

what does contribution to trade involve?

• shipping facilitates the movement of exports (credit) and imports (debit) enabling a strong trade balance

• efficient shipping supports higher volumes of trade

• recorded as a credit/debit

• invisible account

role of transport and shipping in BOP - capital account

what does foreign direct investment (FDI) in shipping infrastructure involve?

• foreign investment in transport/port infrastructure

• recorded as a financial account inflow (credit)

role of transport and shipping in BOP - capital account

what does outward investment by domestic shipping firms involve?

• local shipping companies invest abroad in terminals or logistics infrastructure

• recorded as a financial account outflow (debit)

role of transport and shipping in BOP - capital account

what does foreign loans to fund shipping projects involve?

• loans from foreign banks or financial institutions to support ship purchases or port expansion

• recorded as a financial account inflow (credit)

role of transport and shipping in BOP - capital account

what does shipping company shares and bonds involve?

• purchase of shares or bonds of a country’s shipping firms by foreigners

• part of portfolio investment inflows (credit)