SINGAPORE - Singapore’s fiscal position came under scrutiny on Wednesday, as Parliament sat to debate the Budget.

Amid calls for spending, there were also calls for prudence, with some MPs wondering if Singapore would have enough fiscal room in the future. Others suggested ways to boost revenue.

Deputy Prime Minister and Finance Minister Lawrence Wong said during his Budget statement on Feb 14 that the Government is expecting a deficit of $2 billion, or up to 0.3 per cent of gross domestic product (GDP), for the 2022 financial year, and a deficit of $0.4 billion, or 0.1 per cent of GDP, for the 2023 financial year.

While Singapore’s economy has bounced back from the Covid-19 pandemic, the country continues to be in a tight fiscal position, he said. Hence, it was unlikely that the Government would be able to make good on the $40 billion drawn from Singapore’s past reserves in the three financial years of 2020 to 2022 to fund Covid-19 response measures.

Making good on reserves

Ms Tin Pei Ling (MacPherson) asked if Mr Wong would give a commitment to put back the money that was taken out of the past reserves “at the earliest opportunity to do so”. She suggested that even if it was not done at one go, it could be done in phases.

While it was necessary for the Government to spend money to help Singaporeans get through difficult times, she said, it was also important to guard the reserves and ensure they are not depleted.

“Our pioneers took more than 50 years to save up this pot of gold because they want to protect their children and future generations,” she added.

“Similarly, we too have a duty to use this pot of gold wisely and make sure that we put back what we took once we can so that our children and their children will continue to have this asset to fall back on when they face the crisis of their generation.”

Mr Zhulkarnain Abdul Rahim (Chua Chu Kang GRC) suggested alternative investments to build up the reserves again, such as syariah-compliant bonds, or sukuk, used in Islamic finance.

He noted how demand for green sukuk and environmental, social, and governance sukuk has grown.

Building fiscal firepower and resilience

Singapore cannot afford to stop building its reserves and must husband its resources prudently, said Mr Liang Eng Hwa (Bukit Panjang), since this is the best defence against any future external shocks.

Having a healthy fiscal space has allowed the country to plan ahead, such as when the Jurong Island liquefied natural gas (LNG) terminals were built at a cost of $1.7 billion more than a decade ago, he added.

He said that when the war in Ukraine disrupted the supply of piped gas from Russia, many European countries had to scramble to build LNG terminals. He noted that the LNG terminals here have boosted Singapore’s energy security.

Citing another example, he said the economic blockade on Qatar by its neighbours in 2017 had caused food prices to increase, forcing the country to look for alternative sources of supplies.

Building resilience, he added, requires significant financial commitments and hence the need for adequate fiscal capacity.

Alcohol, gambling and sugar taxes

Meanwhile, Ms Foo Mee Har (West Coast GRC) asked how special transfers, including top-ups to endowment funds and trust funds, would affect Singapore’s fiscal space, noting that these transfers were revised up to $9.2 billion in the 2022 financial year, up $2.9 billion from the estimated figure.

Given the tight fiscal space, the Government will need to continue to review its fiscal strategies, she said, suggesting that it may be worthwhile to raise gambling and alcohol taxes and also introduce a tax on sugar.

Room for those who are better off to contribute more

Workers’ Party MP Louis Chua (Sengkang GRC) also made suggestions for boosting revenue, saying that there is room for those who are better off to contribute more.

He called for income tax on the net annual value of property – removed in 2010 – to be reintroduced for those who own higher-value homes or secondary residences.

The threshold for this should be set at a suitably high level so it can be effective as a wealth tax targeting those who can afford good class bungalows or afford not to rent out their secondary residential properties, he said.

Mr Chua also asked about the cumulative Budget deficit from the start of the Government’s term in 2020 to the financial year of 2023, and questioned if the constitutional requirement to maintain a balanced Budget for each term of government would constrain the Government’s ability to spend if the need arises.

Ample fiscal space?

But Progress Singapore Party Non-Constituency MP Leong Mun Wai asserted that the numbers cited by Mr Wong did not show the true picture.

Not only is Singapore not in a tight fiscal space, but the Government’s spending during the Covid-19 pandemic also illustrates the strength of the country’s fiscal position, he said, adding that there was “slack” in the Budget.