The Government must provide the “broad timeline” to restore the S$52 billion drawn from the country’s past reserves to support the COVID-19 recovery measures, said Aljunied GRC Member of Parliament (MP) Gerald Giam on Wednesday (14 October) during the debate on the Supplementary Budget.
While speaking in Parliament, Mr Giam noted that the COVID-19 pandemic has caused unprecedented economic crisis, both in scale and depth. In fact, this crisis is also the second and third time in Singapore’s history that the Government had to draw funds from its past reserves to support the recovery package.
“At S$52 billion, these were the largest ever draws on past reserves—13 times what was drawn in 2009 during the Global Financial Crisis,” the Workers’ Party (WP) member explained.
He went on to state that during the debate on his Ministerial Statement in June this year, Deputy Prime Minister Heng Swee Keat “clarified that there is no legal or constitutional obligation for the Government to restore the draw from past reserves”.
However, Mr Heng noted that the Government is committed to rebuild the reserves, without giving an exact timeline on how long it will take to do so.
As such, Mr Giam requested DPM Heng to clarify if the Government is actually intending to return the S$52 billion taken from the reserves, and if it will be returned with interest.
He added that he is worried that the amount the Government is intending to restore within a short period may result in unnecessary levels of austerity on the people as well as add constraint to the Government’s fiscal space.
“I am concerned that a commitment to restore $52 billion within a short timeframe may subject our people to unnecessary levels of austerity and constrain the Government’s fiscal space,” the MP expressed.
He continued, “Austerity can have a contractionary effect on the economy. It could slow economic growth and cause some painful cuts to public services, which might impact the poor.”
“Can the DPM assure Singaporeans that they will not have to go through a period of austerity after the economic crisis is over, in order to restore the reserves?”
Make the broad timeline known
In his speech, Mr Giam also call for DPM Heng to “share the broad timelines” for the funds from reserves be restored.
“I am aware that he responded to similar questions from Members back in June, but he did not give any indication as to how long it will take. He only said that it would depend on Singapore’s economy emerging stronger so that we would be in a better position to build up our resources,” he noted.
Mr Giam pointed out that he wants more clarity from the Government in terms of its timeline as putting back S$52 billion into the reserves can take a long time given its huge amount.
As an example, the WP member explained that “restoration timeline of two years will require the provision of S$26 billion a year”. However, this amount is “impossible” as the Government’s highest ever budget surplus was in FY2017 at S$10.9 billion, Mr Giam said.
“Even a timeline of 30 years will still require a provision of S$1.7 billion a year on average. This is more than the combined FY2020 budget for the Prime Minister’s Office and the Ministry of Foreign Affairs,” he noted.
If that’s not all, in this 30-year-peiod, there may be multiple economic crises which could lead to more deficit spending. “There might even be a need for a further draw on past reserves to battle another deep crisis, which would set the timeline back even further” he added.
“Given the budget impact of potential provisions to restore this extraordinarily large amount to the reserves, I feel it is important for the Government to provide more clarity about its broad timelines to do so,” Mr Giam.
Although the WP politician agrees that drawing S$52 billion from the past reserves is “necessary” during this pandemic, but it is also important for the country to “consider carefully how much we want to burden the next generation of Singaporeans with the committed repayment of this draw on past reserves.”
As such, he reiterated his point of wanting to know the Government’s broad timeline in its restoration plan.
“Sir, a timeline of two years, 20 years or 30 years will make a huge difference in the provision required in the budgets of current and future governments. This will translate to vastly different levels of tax hikes and spending cuts required to meet these provisions.”