Borrowing to fund Singapore's immediate needs would be like making children pay for their parents' spending.
Interest rates may be low now, but it is hard to predict with certainty that any accumulated debt obligations can be paid back in future, said Deputy Prime Minister Heng Swee Keat.
This is especially when countries around the world, including Singapore, will be operating in a tighter fiscal space with the uncertain economic outlook, he said.
Mr Heng laid out in Parliament yesterday the reasons why Singapore has opted not to borrow to fund expenditure despite low interest rates, in response to Mr Saktiandi Supaat (Bishan-Toa Payoh GRC).
Mr Saktiandi, who heads foreign exchange research at Maybank, said that in a national crisis, a case could be made to allow the Government to borrow and tap the bond market to fund fiscal spending.
He also suggested that the Government consider relaxing the constitutional requirement of a balanced Budget over each term of Government.
Mr Heng said the Government is already using debt productively and equitably to generate long-term returns, and he listed three examples.
First, it issues debt securities in Singapore such as bonds, then invests the proceeds for returns.
Second, it provides a guarantee for the loans by Changi Airport Group to fund the development of Changi East, including Terminal 5, to lower financing costs.
Third, the Government is considering borrowing to fund the spending on major long-term infrastructure to spread costs equitably and avoid sharp increases in taxes.
Mr Heng said fiscal discipline is one of the fundamental principles underpinning Singapore's fiscal system.
He said: "We spend prudently within our means, and responsibly with a value-for-money culture. The rule to run balanced Budgets for each term of Government remains relevant. We also spend equitably, with the principle that each generation bears the cost of the benefits that they enjoy."