Fresh S$8b Covid-19 measures funded in part by no mid-year bonus for civil servants, lower military spending: MOF

• The S$8 billion Covid-19 support measures require no additional drawdown of national reserves
• The funding for the measures will come from lower government spending in other areas
• Both operating expenditure and development expenditure will be lower than earlier expected

SINGAPORE — The S$8 billion support measures announced by Deputy Prime Minister Heng Swee Keat on Monday (Aug 17) are fully funded by lower government spending in other areas, such as civil servants not receiving a mid-year bonus this year.

The Government’s operating expenditure is estimated to fall S$1.5 billion from earlier projections for the current fiscal year. This is partly due to lower military spending that was the result of delays in projects and the cancellation or deferment of exercises during this pandemic, the Ministry of Finance (MOF) said.

The non-payment of the mid-year annual variable component to civil servants also falls under the category of operating expenditure.

The money to fund the new Covid-19 support measures also comes from an estimated S$6.9 billion, or close to 30 per cent, drop in development expenditure, from S$23.6 billion to S$16.7 billion, MOF said.

This lower level of spending mainly came about from delays in major construction projects during the two-month circuit breaker that restricted activities from April 7 to June 1, and the need to ensure a safe reopening of the construction sector thereafter, the ministry added.

The figures were revealed as part of MOF's interim update on the Government’s latest Budget estimates for the 2020 financial year in view of the impact of the Covid-19 crisis on its budgetary plans and forecasts.

Among measures announced on Monday are an extension to the Jobs Support Scheme for up to seven months until March 2021. This scheme had cost the Government more than S$16 billion so far. 

There is also a S$1 billion programme to subsidise the salaries of new Singaporean hires for a year, subject to a cap. 

Mr Heng, who is also Coordinating Minister for Economic Policies and Finance Minister, said that the new round of measures will not draw on past reserves beyond what was approved earlier, because they could be funded by reallocating monies from other areas.

Considering all factors, including the extra fiscal cost for the new Covid-19 support measures outlined on Monday, the revised overall budget balance for the financial year is projected to be a deficit of S$74.2 billion, MOF said.

This is a S$100 million improvement from the S$74.3 billion deficit projected when announcing a S$33 billion fourth national budget in May.

At the same time, MOF noted that the operating revenue is projected to be S$63.7 billion, which is 7.4 per cent (S$5.1 billion) lower than the revised estimate presented in May’s budget or 16.1 per cent (S$12.3 billion) lower than the initial estimate presented in February.

The S$7.2 billion decrease between the February and May budgets was mainly a result of Covid-19 assistance measures such as the corporate income tax deferment, commercial and industrial property tax rebate and rental relief.

However, MOF said that the drop in projected revenue from May stemmed from the “more subdued economic growth environment”, which led to lower-than-expected revenues from the Goods and Services Tax, betting taxes and stamp duty.

It added that the Government is also estimated to collect S$900 million less after more foreign worker levy waivers were announced on Aug 1.

The ministry still projects Singapore’s net investment returns contributions (NIRC) for the 2020 financial year to be at S$18.6 billion, unchanged from February’s estimate. The projection is about 9 per cent more than the S$17.05 billion from 2019’s NIRC.

The NIRC supplements annual government spending and has been topping government coffers in recent times, with the returns from Singapore's invested reserves being the single largest source of government revenue.