Singapore said on Tuesday that it would tap into its deep reserves for a second consecutive year to fund continued targeted support for businesses amid the Covid-19 pandemic, upending analysts’ expectations that the government would exercise prudence with no end in sight to the global health crisis.
Unveiling the 2021 budget in parliament, Deputy Prime Minister Heng Swee Keat said the fresh drawdown of up to S$11 billion was necessary “given the exceptional circumstances we are in”.
“We are extremely fortunate to be able to tap on our strategic assets and deploy the resources required to deal decisively with Covid-19 and the considerable uncertainties that lie ahead,” said Heng, who is also finance minister. “We should never take our reserves for granted.”
Last year, the government obtained approval from the president to draw some S$52 billion from the reserves, though Heng said the government now forecasts the 2020 drawdown would amount to S$42.7 billion.
The total drawdown in 2020 and 2021 is now expected to total S$53.7 billion, or S$1.7 billion more than the amount the government expected to draw last year.
Heng also indicated a willingness to draw even further on reserves, saying that based on the current outlook with the expectation that the economy would recover, the government would be able to meet a statutory requirement for it to balance its budget
“However, if the global public health and economic outlook worsens, we may not be able to do so,” he said.
If that were to happen and the economic and fiscal situation was worse than expected, the government would still need to invest in new areas “to ride on the structural changes, transform and emerge stronger”, and thus would “seek the president‘s consideration for use of past reserves”, he said.