Using Past Reserves prudently allowed S’pore to weather Covid-19 without falling into debt: Budget 2023

With the PAP Government’s careful stewardship of our reserves, Singapore managed to weather the Covid-19 pandemic without borrowing money and without incurring a debt that would have to be repaid by Singaporeans now or in the future.

Our approach as stewards of our reserves—dipping into it only when there is an absolute need to—has served us well. And it will continue to do so as long as we continue to exercise fiscal prudence, especially in the coming decades as we ramp up public expenditure.

Below is an excerpt from Finance Minister Lawrence Wong’s Budget speech delivered on February 14, where he calls for Singaporeans to continue being “good stewards of our reserves for the benefit of all Singaporeans – both now and in the future”.

In FY2022, we drew on Past Reserves to fund our emergency Covid-19 public health expenditures.

The President had earlier concurred with a draw of up to S$6 billion from Past Reserves specifically for this purpose. Because the public health situation has since stabilised, we now expect to draw a lower amount of up to S$3.1 billion from Past Reserves.

This brings the total expected draw on Past Reserves from FY2020 to FY2022 to S$40 billion.

This is lower than the initial draw of S$52 billion that the Government had sought the President’s agreement for.

It reflects our prudent approach in using our reserves – drawing on them judiciously, only when there are compelling reasons to do so.

So all in all, putting together our revenue upside with our higher spending, we expect a slight deficit of S$2 billion, or 0.3 per cent of GDP, for FY2022.

We last drew on Past Reserves during the Global Financial Crisis in 2008. We spent S$4 billion in FY2009 and were able to put back what we drew two years later due to the sharp recovery in the economy and in our fiscal position.

This time, we are in a different position.

Our economy has recovered back to pre-Covid levels. But we continue to be in a tight fiscal position.

It is therefore highly unlikely that we will be able to put back what we have drawn from Past Reserves.

But we will not waver from our commitment to safeguard our reserves as a key strategic asset. They have helped Singapore to weather major global shocks, prevent high unemployment rates, and build up our capabilities even in the midst of economic downturns.

Other governments spent more during this pandemic too. But they largely financed their additional spending by borrowing, which will eventually have to be repaid by future generations. In contrast, our reserves allowed Singapore to respond quickly without falling into debt, or burdening either current or future generations of Singaporeans.

So we will continue to uphold our practice of fiscal prudence and the principles that underpin the protection of our reserves.

And this is why it was necessary to raise the GST rate – to ensure we have the resources to take good care of our seniors, and to keep a balanced budget over the medium term.

I thank Singaporeans for your understanding of why we must continue to live within our means and contribute our fair share of revenues, and be good stewards of our reserves for the benefit of all Singaporeans – both now and in the future.

Images via: MOH, Victor He on Unsplash