SINGAPORE — For only the second time in over a decade, in-principle approval has been given for the government to draw on past reserves, in order to fund a stimulus package that will address the economic fallout from the COVID-19 pandemic.
The approval by President Halimah Yacob was announced in her speech to Parliament on Thursday (26 March) that was read out by Speaker Tan Chuan-jin, ahead of Deputy Prime Minister and Finance Minister Heng Swee Keat presenting a supplementary Budget to the House.
Heng said that the government will allocate another $48 billion for the Resilience Budget to combat the “unprecedented” COVID-19 crisis and will draw up to $17 billion from Singapore’s past reserves to fund it.
“It is a matter of survival,” said Halimah, warning that the current downturn is likely to be deeper and last longer than the SARS crisis and the 2009 global financial crisis. “Our reserves were built up over the years through prudent spending, and were set aside precisely to cater for rainy days.”
The custodian of the nation’s reserves added, “The situation we are heading into looks more like a thunderstorm than a drizzle.”
The president said that she had arrived at her decision after extensive consultations with Prime Minister Lee Hsien Loong, Heng, the Council of Presidential Advisers and multiple agencies.
She noted noted that since the reserves protection framework was established in 1991, the government has drawn on past reserves just once, during the global financial crisis in 2009, when then-President S R Nathan approved a draw of $4.9 billion to fund part of the Resilience Package.
However, she said, “Our current crisis is unparalleled in modern history.” She noted that governments around the world have had to think hard and make unprecedented moves over the past few weeks, such as locking down an entire country.
‘Successive waves of bad news’
The previous year ended on a “cautiously optimistic” note, said Halimah, as it seemed then that the global economy was finally poised for recovery following a year of subdued growth caused by US-China trade tensions.
But the coronavirus outbreak “totally changed” that outlook. Halimah revealed that when government officials briefed her on Budget 2020, which was announced in February, the option of drawing on past reserves if the situation were to worsen was discussed. This was not carried out as current reserves were still sufficient for the scale of the package envisaged then.
“However, since then, we have had successive waves of bad news.” A new wave of coronavirus cases has taken hold in Europe and the US, with the World Health Organisation declaring the outbreak as a pandemic. The drastic measures taken by countries to protect borders and lock down societies have had “serious repercussions”, she noted.
“Already overdue for a market correction, share markets worldwide have fallen sharply. We are faced with a double whammy of a worldwide public health emergency and a deepening economic crisis.”
Earlier on Thursday, the Ministry of Trade and Industry announced that the economy shrank 2.2 per cent in the first quarter from a year earlier, with heavy hits to services, construction and manufacturing.
Many Singaporeans suffering
The government has therefore assessed that a substantial second support package is needed to stabilise the economy, keep as many workers as possible employed and help viable enterprises to survive.
“We need to do our utmost to help our businesses and people quickly.”
From her conversations with Singaporeans and unions, said Halimah, it is clear that companies and workers are suffering badly. For example, the hotel occupancy rate is currently at just 20 per cent. Many airlines, including national carrier Singapore Airlines, have grounded almost all their planes.
Halimah concluded, “It is not anybody’s wish for a crisis to befall us, but from time to time, it is inevitable. When it happens, how we respond will define us as a nation.”
“So let us work together as one people and support one another on this journey. Let us overcome the crisis and emerge stronger and more cohesive as a nation.”
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