SINGAPORE - For a second year in a row, Singapore will dip into its past savings to pay for measures needed to fight Covid-19, with a draw of $1.7 billion on the reserves.
The amount will be combined with the $9.3 billion that was drawn last year but not used, with all $11 billion going towards funding the Covid-19 Resilience Package.
Altogether, the expected draw on the reserves over the two financial years will come up to a total of $53.7 billion.
Announcing this in his Budget statement on Tuesday (Feb 16), Deputy Prime Minister Heng Swee Keat said running a fiscal deficit to support targeted relief was warranted in the immediate term.
Even as Singapore's economy reopens, there are still badly hit sectors like aviation that are in the doldrums and segments of society that still need help. At the same time, public health measures have to continue with the global battle against Covid-19, with success uncertain.
Singapore is expected to record a deficit of $11 billion, or 2.2 per cent of gross domestic product (GDP) this year, with a considerable fiscal boost coming from economic and workforce transformation measures.
This compares to an overall deficit of $64.9 billion, or 13.9 per cent of GDP last year, the largest since independence.
Explaining the decision to tap the reserves again, Mr Heng noted that the Covid-19 Resilience Package measures were extraordinary and temporary.
He added: "This is the second consecutive financial year where we will be drawing on our past reserves. This is necessary, given the exceptional circumstances we are in.
"We are extremely fortunate to be able to tap our strategic assets and deploy the resources required to deal decisively with Covid-19 and the considerable uncertainties that lie ahead. We should never take our reserves for granted."
He also said that President Halimah Yacob has given her in-principle support for the move.
Over five budgets last year, the Government had proposed a draw of up to $52 billion on the reserves to tackle the challenges brought by Covid-19, but used only $42.7 billion.
Mr Heng said that as people and businesses here had adapted effectively to the situation, the Government was able to bring the pandemic largely under control and did not need to spend as much on some of the public health measures as it had anticipated.
Casting his gaze ahead, he said the Government's priorities in the medium to long term are to invest strategically for growth and press on with economic transformation, and to lay the groundwork to position Singapore for the future.
He reiterated the need to balance between immediate and long-term needs, making clear that Singapore would have to return to running balanced budgets beyond the current crisis.
"It was fiscal prudence and discipline that allowed us to accumulate our national reserves, which have enabled us to respond decisively to this crisis," he added.
He noted that Singapore's recurrent spending needs had already been going up before Covid-19 hit and the fundamental drivers of these fiscal trends have not changed. They include an ageing population and maturing society and growing healthcare and social spending.
Stressing the importance of meeting such structural needs in a disciplined and sustainable way, he said: "Our fiscal approach must strike a careful balance between addressing our immediate needs and meeting our longer-term structural needs in a responsible manner."