No plans to dip further into reserves to fund extra $8b needed

Singapore's operating expenditure is also estimated to see a reduction of $1.5 billion.
Singapore's operating expenditure is also estimated to see a reduction of $1.5 billion.ST PHOTO: LIM YAOHUI

Singapore has no plans to dig further into its national reserves for another $8 billion that is needed to continue the country's battle against the Covid-19 pandemic.

Instead, the extra expenditure will come out of the coffers of development projects that are being delayed because of the pandemic, Deputy Prime Minister Heng Swee Keat said yesterday in a ministe-rial statement.

Delays in major construction projects because of the circuit breaker and the need to ensure a safe reopening of the construction sector subsequently have shrunk Singapore's 2020 development expenditure by an estimated $6.9 billion, the Finance Ministry said in an annex to Mr Heng's statement.

Likewise, Singapore's operating expenses are set to decline as well by an estimated $1.5 billion.

The drop is mainly due to lower military expenditure because of pandemic-related delays in projects and the cancellation or deferment of exercises.

Another reason is lower manpower costs as civil servants did not get the usual mid-year bonus this year, said the ministry.

Yesterday's announcement of the additional $8 billion needed is on top of the nearly $100 billion from the earlier four 2020 Budgets unveiled between February and May to tackle the evolving Covid-19 crisis.

The latest aid is for the expanded measures to save jobs, create new ones and help Singapore seize new opportunities for growth in a post-coronavirus world.

"I have briefed the President and the Council of Presidential Advisers on the latest situation and the need for these measures," said Mr Heng, who is also the Coordinating Minister for Economic Policies and Finance Minister.

"I thank them for their earlier support and approval for the use of past reserves to respond to the crisis, which has put us on a strong footing to manage the evolving situation."

Yesterday, his ministry also gave an interim update of Singapore's Budget estimates for the 2020 financial year ending March 31 next year.

With the lower estimated expenditure and revenue plus the extra $8 billion needed, Singapore's overall Budget deficit is forecast to be $74.2 billion this financial year, a tad lower than the $74.3 billion deficit projected in May this year.

 
 
 
 

Operating revenue is now projected to be $63.7 billion, which is $5.1 billion, or 7.4 per cent, lower than the revised estimate given in May's Fortitude Budget.

The decline is mainly due to the "more subdued economic growth environment due to Covid-19 and lower economic activity during the circuit breaker period".

This, in turn, led to lower than expected revenues of $4.1 billion, primarily from goods and services tax, betting taxes and stamp duty, said the Finance Ministry.

Another major revenue dampener is the extension in the waiver of foreign worker levies announced at the start of this month. It amounted to an estimated $0.9 billion.

At the same time, Singapore is forecast to spend a total of $102.1 billion, which is $8.4 billion, or 7.6 per cent, lower than the May estimate.

Its operating expenditure is expected to be $85.4 billion, which is $1.5 billion, or 1.7 per cent, lower than the sum announced in May.

"The decreases are partially offset by additional expenditure for further Covid-19 support measures such as sector-specific support and measures to bolster social resilience and public health," the Finance Ministry added.

Meanwhile, development expenditure is estimated to be $16.7 billion, or 29. 2 per cent, lower than the sum announced in May.

But special transfers are estimated to rise to $54.5 billion, which is $3.2 billion, or 6.3 per cent, higher than the May estimates.

The increase is mainly due to the extension of the Jobs Support Scheme to cover wages up to March next year. The Net Investment Returns Contribution - the returns from Singapore's invested reserves - is expected to be $18.6 billion. This remains unchanged from the May estimate.

A version of this article appeared in the print edition of The Straits Times on August 18, 2020, with the headline 'No plans to dip further into reserves to fund extra $8b needed'. Subscribe