SINGAPORE - The support package to help companies and workers affected by the period of heightened alert is expected to cost $1.2 billion, with the amount covered through the reallocation of funds, said Finance Minister Lawrence Wong in Parliament on Monday (July 5).
There will be no need to draw from the reserves again, he added, noting that Singapore is already expected to draw up to $53.7 billion from its past savings, an amount “which we are not likely to be able to put back anytime soon, if at all”.
“Our expenditure in financial year 2020 was the highest ever in the history of our country; and this unprecedented fiscal response has also led to the largest budget deficit in Singapore’s history,” he added.
“Now that things are better, we should refrain from drawing further on past reserves. Instead, we will fund the support measures using resources that were approved in this year’s Budget. That is the responsible way to manage our finances.”
In his first ministerial statement on government spending since becoming finance minister in May, Mr Wong said about half the $1.2 billion will be covered by funds earmarked for the Deep Tunnel Sewerage System and North-South Corridor projects.
Singapore will, instead, borrow for the two projects and capitalise their development expenditure from the fourth quarter of this year, under the Significant Infrastructure Government Loan Act (Singa), which allows borrowing for long-term infrastructure projects.
Mr Wong said this would be a one-off adjustment as Singa was passed only recently, after the start of the 2021 financial year, and that in future, the amounts to be borrowed under Singa will be incorporated as part of the annual Budget estimates.
“We will not have such reallocation space in future,” he stressed.
The remaining $0.6 billion will be reallocated from underutilisation of development expenditure mainly due to delays in projects arising from Covid-19. Around the world, Covid 19 has pushed government spending and borrowing to record levels not seen since World War II.
Mr Wong said not many are paying attention to how these debts will be serviced and warned: “They may look affordable now, but will not be so once interest rates increase to more normal levels.”
“The day of reckoning will come, and the burden will surely fall on the young and future generations.”
With the foresight and fiscal prudence of its previous generations, Singapore has been one of the few countries bucking this trend, he added.
But the country has had to draw on past reserves in two consecutive financial years – last year at the height of the pandemic when the economy suffered its worst-ever recession and shrank by 5.4 per cent, and again at the start of financial year 2021 to finance the continuing Covid-19-related measures.
Mr Wong said Singapore is in a better position to deal with the pandemic now than at the start, with the economy steadily improving, better testing and tracing capabilities, as well as a vaccination programme that is making good progress.
“We will not hesitate to use the full measure of our fiscal firepower to protect the lives and livelihoods of Singaporeans. But we also need to be careful about the state of our public finances, and ensure they are sustainable for the future,” he added.
A spike in unlinked community cases, with Covid-19 clusters emerging at Tan Tock Seng Hospital and Changi Airport, forced the country into phase two (heightened alert) on May 16.
Restrictions were put in place to curb the spread of the more transmissible Delta variant of the coronavirus, especially in indoor settings where people remove their masks, including at food and beverage (F&B) outlets, gyms and fitness centres, as well as live arts and cultural performances venues.
The restrictions were eased from June 14, when the country moved into phase three (heightened alert).
“To deal with the latest round of outbreaks, we decided there was no need to go into an economy-wide circuit breaker like what we had done last year,” said Mr Wong.
“Instead, we adopted more targeted measures calibrated based on the severity of the outbreaks.”
He added that the support measures, first announced on May 28, were likewise targeted to help businesses and individuals most impacted by the tightened restrictions, with the Government consulting closely with workers, union leaders and business leaders.
A key plank is the enhancement of the Jobs Support Scheme (JSS) for sectors that have been more badly affected. F&B outlets, gyms, and performing arts organisations, for instance, received JSS support of 50 per cent.
Mr Wong said JSS support will be tapered off to 10 per cent for two weeks from July 12, as Singapore prepares to reopen its economy further.
Rental relief was also provided for businesses, including rental waiver for hawkers in government-owned premises as well as for small- and medium-sized enterprises (SMEs) that are qualifying tenants of government-owned commercial properties.
Meanwhile, targeted help was given to affected groups and workers.
These included support for taxi and private hire car drivers through the Covid-19 Driver Relief Fund, and the Covid-19 Recovery Grant (Temporary) scheme which was introduced for employees and self-employed persons.
Mr Wong announced that the Temporary Bridging Loan Programme and Enhanced Enterprise Financing Scheme – Trade Loan to help SMEs tide over cash flow problems, will be extended for an additional six months from Oct 1, 2021 to March 31, 2022.
He noted that it is important to support SMEs even as the economy recovers, so that they can prepare for the new normal.
The Government had sized the package of measures based on what was assessed to be appropriate, to help businesses and workers during this period.
Mr Wong noted that most parts of the economy had continued to operate over the past two months, unlike during the circuit breaker period from April to June 2020, “when many activities were curtailed and literally the entire economy was shut down”.
He added that the restrictions had worked in taming the spread of the virus, while allowing most parts of the economy to continue operating, and that Singapore expects to open up further in the coming weeks.