Amid increased spending and a record four Budgets totalling some $92.9 billion announced this year, Singapore expects to record its biggest deficit since the country's independence in 1965.
Announcing the Fortitude Budget in Parliament yesterday, Deputy Prime Minister Heng Swee Keat said the deficit of $74.3 billion will amount to 15.4 per cent of gross domestic product.
It is a combination of two factors: Increased spending and expected drop in government revenue as safe distancing measures reduce production and consumer spending that, in turn, will further drive down fiscal takings.
The revised operating revenue of $68.8 billion is lower than the estimated $76 billion. It marks a big departure from the balanced or surplus budgets that the Government has maintained over the years.
Mr Heng, who is also Minister for Finance, said yesterday that the exceptional circumstances sparked by the Covid-19 pandemic have made it necessary for the Government to dig deep into its pockets and also into past reserves to bolster Singapore's economic and social resilience.
Another thing it has had to do is to set aside $13 billion in the Contingencies Fund and the Development Contingencies Fund. These are for urgent, unforeseen expenditures.
Under the Constitution, Parliament can create the funds to pay for unexpected requirements which are not provided for in the Supply Act. The President must consent to the advance.
Each year in the Budget, the Government puts aside a buffer of $3 billion altogether into the two funds, but the larger sum this time around will allow the Government to react to any needs swiftly amid the fast-changing corona-virus situation, said Mr Heng.
Noting how four Budgets have had to be deployed within less than four months to help Singaporeans through the crisis, he added: "While we have the resources and the will to do what is needed in fighting Covid-19, we must continue to stay nimble and adaptive in this rapidly evolving situation."
"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," said Mr Heng.
"The uncertainty on the medical front is fuelling the uncertainty in the global economy."
He said the money will allow the Government to respond quickly to any unforeseeable developments, such as if the medical or economic situation deteriorates and more public health or fiscal measures must be put in place.
"We will do our best to avoid this, but we must be prepared for any eventuality," said Mr Heng.
The Cabinet, President Halimah Yacob, and the Council of Presidential Advisers were all briefed before the funds were set aside, he said, stressing that the use of the funds is sub-ject to proper governance and accountability.
While the Minister for Finance may use money from the contingencies funds if he is satisfied that there is an urgent and unforeseen need, the money can be advanced only if the President concurs as well.
After that, the amount advanced has to be included in a Supplementary Supply Bill or Final Supply Bill, which will be presented to Parliament to be voted on.
"This approach is appropriate and prudent, given the fluid situation which may require the Government to act swiftly in the coming months," said Mr Heng.
