Budget 2020: Singapore should preserve fiscal buffers to bounce back 'if tide turns against us'

SINGAPORE needs to maintain its fiscal posture and leave enough to deal with unexpected shocks and longer-term challenges, Deputy Prime Minister and Finance Minister Heng Swee Keat said in his Budget speech on Tuesday.

The Constitution requires a balanced Budget over each term of government. “We are being prudent to preserve fiscal buffers, to ensure that we have the wherewithal to stand our ground and bounce back quickly if the tide turns against us,” Mr Heng said.

“This is how we have been able to respond decisively to fight the Covid-19 outbreak, and support Singaporeans and our workers,” he added.

The minister on Tuesday announced two special packages with a total budget of S$5.6 billion, to alleviate the impact of the novel coronavirus outbreak on businesses and jobs. He also allocated S$800 million to support frontline agencies in their efforts to contain the virus spread.

On top of these measures, the government has also been able to set aside an Assurance Package for Singaporeans to cushion the upcoming increase in the goods and services tax (GST) rate, Mr Heng noted.

The accumulated surpluses at the end of each term of government becomes part of Singapore’s past reserves, which are invested.

Today, the net investment returns contribution from the reserves is the biggest component of the Republic’s revenue, Mr Heng said. “This is remarkable for a country with no natural resources.”

He also said that Singapore must remain disciplined in its use of borrowings.

This is despite the fact that borrowing to develop major long-term infrastructure allows the cost to be distributed equitably across current and future generations, without the need for sharp increases in taxes.

“We should continue to pay for recurrent needs, like healthcare expenditure, through recurrent revenues such as taxes,” the minister said.

He emphasised that the government should continue to plan its finances based on long-term structural drivers.

“We must anticipate long-term spending needs and be disciplined to raise revenues ahead of time, so that we can continue to provide quality public services to all Singaporeans.”

At the same time, the government also needs to be mindful of the uncertainties and downside risks to its revenue, he added.

For more Budget 2020 stories, visit bt.sg/budget20.