Solidarity Budget: S$5.1b package to be funded by S$4b of past reserves

A SUPPLEMENTARY S$5.1 billion Solidarity Budget was announced by Deputy Prime Minister and Finance Minister Heng Swee Keat in Parliament on Monday, to support households and businesses through the four-week circuit breaker period to combat the Covid-19 pandemic.

This includes increased wage offsets in April, enhanced eligibility for self-employed income relief, waiving foreign worker levies in April, providing higher rental waivers, and a S$600 cash payout for all adult Singaporeans.

The additional support for businesses and workers in the Solidarity Budget will cost S$4 billion, with the Solidarity Payment cash payouts costing another S$1.1 billion. A second draw on past reserves - amounting to S$4 billion - has been proposed, and in-principle support obtained from President Halimah Yacob.

This second supplementary budget comes just 11 days after the supplementary Resilience Budget was introduced on March 26. Mr Heng noted that the global Covid-19 pandemic "has exploded" since then, with over a million people infected and half of the world in lockdown.

Singapore has progressively ratcheted up its own measures, including the circuit breaker measures to begin from April 7, including the closure of most workplaces apart from essential services and some other exceptions.

"The circuit breaker is essential, but we are acutely aware that it will be painful. It will disrupt businesses and impact workers severely," said Mr Heng. Restrictions in Singapore's trading partners will also reduce demand for the country's exports, with gross domestic product growth expected to take a further hit.

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"But we must take these hard decisions, make the difficult adjustments, and do all that we can in the next few months, to protect the lives of our people," he said. "Otherwise, if the outbreak escalates, the impact on lives and livelihood will be even worse."

The Jobs Support Scheme introduced in Budget 2020 in February will be enhanced for one month, offsetting 75 per cent of gross monthly wages for the first S$4,600 of wages paid for each local employee in April. The first payout in this scheme will also be brought forward to April, from May previously.

Foreign worker levies due in April will be waived to help reduce business costs and relieve cash flow pressures. "To help them preserve their business structure and quickly resume operations, we will also provide employers with a foreign worker levy rebate of S$750 for each work permit or S Pass holder, based on previous levies paid in 2020," said Mr Heng.

Eligibility changes will mean that about 100,000 self-employed persons will be automatically eligible for the Self-Employed Person Income Relief Scheme, up from 88,000 previously.

The government's risk share of loans will rise to 90 per cent from 80 per cent previously for loans initiated from Apr 8, 2020 till Mar 31, 2021, under the Temporary Bridging Loan Programme, the Enterprise Financing Scheme - SME Working Capital Loan, and the Enterprise Financing Scheme - Trade Loan.

All adult Singaporeans will also get a one-off S$600 Solidarity Payment in cash. This comprises S$300 brought forward from the earlier-announced Care and Support payout, as well as an additional S$300.

President Halimah had earlier given in-principle support for the government to draw up to S$17 billion from past reserves to partly fund the Resilience Budget. The government has now proposed a further S$4 billion draw on past reserves for the Solidarity Budget and obtained her in-principle support for this too. The remaining $1.1 billion will be funded from the fiscal space of the current term of government.

Including measures in the original Budget 2020 and the two supplementary budgets, the government's response to Covid-19 will total S$59.9 billion, or about 12 per cent of gross domestic product. The overall budget deficit FY 2020 will rise to S$44.3 billion or 8.9 per cent of GDP.

"We have the plans, and the financial resources to carry out these plans without burdening future generations with the bill," said Mr Heng. "We are grateful to our founding generation for their foresight and discipline. The key now is how we can pull together, in solidarity, as a nation to implement these plans, and make adjustments as the situation continues to evolve."