How Is the Singapore Government Paying for the $54.8 Billion Unity and Resilience Budget to Fight COVID-19?
2020 has not been off to a great start so far.
As the global economy worsened amidst the COVID-19 outbreak, governments around the world have been implementing stimulus packages in a bid to jumpstart and keep their country’s economy afloat.
The Singapore Government has also been quick to take action.
Announcing the first COVID-19 stimulus package in Parliament, entitled the Unity Budget, to the tune of $6.4 billion.
This was announced during the Singapore Budget 2020 on 18 February 2020.
On 26 March 2020, Deputy Prime Minister and Minister for Finance Heng Swee Keat announced the second COVID-19 stimulus package entitled the Resilience Budget in Parliament.
This time, $48.4 billion will be set aside by the Singapore Government to help businesses, workers, and families dealing with the fallout from the COVID-19 pandemic.
This will bring the amount set aside to fight COVID-19 to a whopping $54.8 billion!
With the implementation of these stimulus packages, you might be wondering, “How is the Singapore Government paying for this?”
“Will this cause a Singapore Budget deficit?”
Here is what you need to know.
TL;DR: How Are We Paying for the $54.8 Billion Unity and Resilience Budget to Fight COVID-19?
- How does the Singapore Budget work?
- How much will the Unity Budget cost?
- Where will the money for the Unity Budget come from?
- How much will the Resilience Budget cost?
- Where will the money for the Resilience Budget come from?
How Does the Singapore Budget work?
To start off this discussion, we will need to understand how the Singapore Budget works.
Singapore Budget Financial Year (FY)
The Singapore Budget is generated for the Financial Year (FY) which starts on 1 April of every calendar year and ends on 31 March of every calendar year.
The year’s budget is broken up into two components:
- The revised government revenue and expenditure projections for the current FY
- The planned government revenue and expenditure in the upcoming FY
Singapore Budget Revenue
The Singapore Government’s operating revenue which accounts for about 15% of Singapore’s Gross Domestic Product (GDP) comes from taxes.
The majority of the tax revenue comes from three main sources:
- Goods and Service Tax (GST)
- Corporate Income Tax
- Individual Income Tax
Additionally, The Net Investment Returns Contribution NIRC (NIRC) further supplements Singapore’s revenues — about 2% of Singapore’s GDP.
Singapore Budget Government Surplus
Ever since the current Government took office in 2015, there have been surpluses for FY2016, FY2017, and FY2018.
|Financial Year (FY)||Actual Figures|
FYI: this is a good thing because it means that the Government has been prudent in spending.
Any surplus accumulated at the end of the fiscal year is kept as Current Reserves.
But there are exceptions to this as well.
For example, in 2019, the accumulated surpluses from the Current Reserves were distributed through the Bicentennial Bonus.
The Current Reserves can only be kept till the end of the term of the current Government.
At the end of each term of government, the remaining Current Reserves are transferred to the Past Reserves — which are protected by the Constitution.
Think of this as forced savings for a rainy day which the current or future governments cannot touch unless during exceptional times and only with approval from the President (who is the custodian of the Reserves).
So… how much will the Unity Budget cost?
The Unity Budget will cost $6.4 billion in total.
The money will be distributed into three categories:
- $800 Million will be allocated to the Ministry of Health on top of their annual budget to help fight the coronavirus
- $4 Billion will be allocated to the Stabilisation and Support Package to help businesses and workers affected by this virus
- $1.6 Billion will be allocated to the Care and Support Package to help households deal with the cost of living
Where Will the Money for the Unity Budget Come From?
The money for the Unity Budget will be drawn from the Current Reserves.
This means that the Past Reserves will be not be touched for the Unity Budget.
Now, let’s look at the Resilience Budget.
How much will the Resilience Budget cost?
On 26 March 2020, Deputy Prime Minister and Minister for Finance Heng Swee Keat announced the second COVID-19 stimulus package in Parliament where he unveiled the
2020 Supplementary Budget.
That’s slightly more than twice of the $20.5 billion used to fight the Global Financial Crisis.
To put this into context, this $48.4 billion takes up almost half of the Government’s $106 billion budget for FY2020.
This is in addition to the $6.4 billion announced for the Unity Budget earlier to soften the fallout from the COVID-19 outbreak.
In total, the amount announced to fight COVID-19 is $54.8 billion, or close to 11% of Singapore’s GDP!
Where Will the Money for the Resilience Budget Come From?
If you caught the announcement of the Resilience Budget.
President Halimah Yacob has given her in-principle support to draw up to $17 billion from the country’s Past Reserves to fund part of this $48 billion Resilience Budget.
This means that the money for the Resilience Budget will come mainly from Singapore’s Past Reserves — of which the total amount is not known to the public.
What we do know is that Singapore has USD$282,995.2 million in her Foreign Reserves which is one component of the Past Reserves.
What Does This All Mean For Singapore?
Ultimately, Singapore will see an unprecedented budget deficit of $39.2 billion or 7.9% of Singapore’s GDP.
However, Minister Heng reiterated that Singapore will still remain fiscally sustainable because it has been disciplined in the use of Past Reserves.
What do you think of this whole event?
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