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Fortitude Budget: Singapore's fiscal strategy keeps longer-term needs in view
EVEN as it battles the Covid-19 crisis, Singapore continues to plan ahead for "significant fiscal outlay" to meet its longer-term structural needs, said Deputy Prime Minister and Finance Minister Heng Swee Keat said on Friday.
These needs include investments in healthcare, education and training, and infrastructure to support an ageing population, ensure Singaporeans have opportunities to obtain skills training to access good jobs, and maintain Singapore as a liveable city.
"These heavy and rising expenditures were known even before the outbreak of Covid-19," said Mr Heng, who was speaking in Parliament to wrap up the Fortitude Budget debate.
"Covid-19 has increased the urgency of some of these investments, such as developing advanced medical research and production capabilities, and expanding training capacity for our workers. It is hence critical that we deploy the right mix of fiscal instruments that meets our principles of prudence and equitable spending."
Mr Heng said that for major long-term infrastructure spending that requires hefty upfront investments but will benefit Singaporeans for many generations, the government will consider borrowing so that the cost can be fairly distributed among those who benefit.
However, funding for recurrent spending should come from recurrent revenues. Such spending primarily benefits the current generation of Singaporeans and it would be "fair and responsible" for them to help pay for it, Mr Heng said.
One source of recurrent revenue that will need to be strengthened is the goods and services tax (GST). As announced in the Unity Budget in February, the 2 percentage-point rate increase that was to take place in 2021 has been postponed, but it is still needed and will need to take effect by 2025.
Mr Heng noted that Singapore has already set aside S$6 billion to help cushion the impact of the GST rate increase for Singaporeans. This will offset the additional GST expenses for most households for at least five years, with more allocated for lower-income households.
The government will continue to absorb GST on publicly subsidised healthcare and education.
"With this differentiated and principled fiscal strategy, each generation rightly pays for the benefits that they enjoy, and we do not saddle future generations with our bills," said Mr Heng.