Govt seeks to draw another S$31b from past reserves, bringing total drawdown to S$52b to tackle Covid-19 crisis

SINGAPORE — The Government will seek to draw an additional S$31 billion from its reserves to fund its fourth Budget so far this year, aimed at helping Singaporean workers and businesses affected by the Covid-19 pandemic, said Deputy Prime Minister Heng Swee Keat on Tuesday (May 26). That takes the total proposed drawdown to S$52 billion.

Unveiling the Fortitude Budget in Parliament, Mr Heng, who is also Finance Minister, said that President Halimah Yacob has given her in-principle support for a further draw on Singapore’s past reserves. 

Under Singapore’s Constitution, the President must formally assent to the drawdown of reserves.

This is the latest proposed drawdown of the reserves since the Covid-19 outbreak landed on Singapore’s shores in late January. 

President Halimah had earlier given her in-principle approval for the Government to draw a total of S$21 billion for the previous two Budgets — S$17 billion for the second package of measures known as the Resilience Budget, and another S$4 billion for the third set of measures, the Solidarity Budget. 

This means that the Government is looking to draw a total of S$52 billion from the reserves this financial year, ending March 31, 2021.

“This is a very significant amount, necessitated by the very exceptional nature of the Covid-19 crisis,” said Mr Heng.

The further drawdown is necessary as the Government used up almost all its accumulated surplus in the current term of Government in the previous three Budgets unveiled so far this year. 

The Government had dedicated $92.9 billion or 19.2 per cent of Singapore’s annual economic output over the past three Budgets: The Unity Budget, the Resilience Budget and the Solidarity Budget. 

The overall budget deficit for the financial year ending March 2021 has increased to S$74.3 billion, or 15.4 per cent of the country’s annual economic output. Singapore is able to fund such huge figures without borrowing money abroad  —  as many countries are forced to do  —  given the money it has set aside for such emergencies.

“This is the largest overall Budget deficit in Singapore’s history, since our independence (in 1965),” said Mr Heng.

He reiterated: “With Covid-19, we are facing unprecedented levels of uncertainty – it is uncertain how the pandemic will evolve, if there will be a second or even third wave, and if, and when, vaccines will be available. The uncertainty on the medical front is fuelling the uncertainty in the global economy." 

In each year's annual Budget, the Government keeps S$3 billion in two contingency funds, as allowed by the Constitution. Any advance from these funds has to be returned in the same financial year so that the year ends with the full S$3 billion.

To meet the unprecedented level of uncertainty, Mr Heng said a larger sum of S$13 billion will be set aside in the Government's contingency funds, so that it can respond quickly to unforeseen changes from Covid-19. 

“This could include public health or fiscal measures that have to be put in place quickly, if the medical or economic situation deteriorates. We will do our best to avoid this, but we must be prepared for any eventuality," said Mr Heng, adding that the use of these funds would be subject to proper governance and accountability.