Heng: Reserves may be put to use to finance second support package

The Singapore government is not ruling out the need to utilise past reserves to fund the second support package to combat the impacts of Covid-19, remarked Deputy Prime Minister and Finance Minister Heng Swee Keat at the Budget Roundtable 2020 yesterday (11 March).

Mr Heng said that the few weeks following his Budget announcement, the situation of Covid-19 has been worsening.

In order to “stabilise the economy and to emerge stronger from this”, the government has begun making plans for a second stimulus package. Mr Heng had a discussion with Prime Minister Lee Hsien Loong about the key measures for the second package on Tuesday, he stated.

When queried about whether tapping past reserves will be part of the government’s plan, Mr Heng said that “this is an option that we are looking at very carefully”. To do so, there is a need of approval from the Council of Presidential Advisers as well as the President, he added.

The current term of government has “a sizeable amount of current reserves”, hinted Mr Heng, adding that it is “not ruling out the use of past reserves”. The current has a surplus of around S$7.7 billion.

After the roundtable, Mr Heng sat in for a radio interview with MONEY FM 89.3 where he mentioned that depending on how large the package will be and “how much contingency” must be provided, he was “working through the different numbers”. He added that experts foresee the outbreak persisting “at least to the end of the year”.

On Wednesday (11 March), President Halimah Yacob wrote in a Facebook post regarding the deteriorating global conditions: “In such a situation, we must do our utmost to support our people and our businesses, including considering using the past reserves if necessary. If our public health is at stake and our people’s welfare affected, we need to do the necessary.”

According to President Halimah, the situation was being monitored and that the government have been keeping her and the Council updated.

Mr Heng pointed out that similar to the Budget’s S$4 billion Stabilisation and Support Package, the second package will primarily provide help for businesses, by helping them to transform and grow, allowing companies to “not just survive but prepare for the upturn”.

The focus is to use this current situation to build the capabilities of small and medium-sized enterprises (SMEs) as well as supporting workers.

Mr Heng noted that the government will “take both a targeted and a broad-based approach” to the query by panellist and Institute of Policy Studies senior research fellow Faizal bin Yahya on whether the extra assistance would be for specific affected sectors.

The interlinked nature of the economy means that workers that remain employed will continue to consume, which helps related sectors grow, Mr Heng added. Measures to improve public hygiene, like SG Clean, can encourage public spending and improve consumer confidence.

Businesses should also play a role in helping others, such as landlords making it a point to help their tenants survive, he encouraged.

According to OCBC Bank’s Head of Global Commercial Banking, Linus Goh, who was also the panellist, support for customers and individuals have also been implemented by OCBC Bank. Mr Heng recommended that banks could partner up with the Association of SMEs to educate SMEs about how loan risks can be minimized with the risk-based approach to lending.

In addition, providing support to self-employed individuals is also a concern of the government. Not only are efforts concentrated on preserving jobs, but the second package will also offer assistance to retrenched workers.

“Our approach is, first and foremost, to prevent retrenchments,” stressed Mr Heng. The approach would benefit business in the long term, protecting them from losing experienced staff, in addition to protecting employees. In the event that the companies’ business model becomes defunct, “releasing those workers to new industries that are growing will be important”.

The Managing Director of Ademco Security Group and panellist, Toby Koh suggested that the government could encourage healthy, strong companies to employ during this period. Mr Koh added that wage support could be included for new hires.

At these recommendations, Mr Heng expressed agreement, in the hopes that companies with a long-term view will avail this opportunity to hire, particularly workers between the ages of 40 to 60 who are without jobs.

With this approach, “the redistribution of our very scarce labour to productive uses can continue”. Furthermore, companies who employ locals aged 40 and above through reskilling programmes will get salary support which is part of the Budget’s SkillsFuture Mid-Career Support Package, Mr Heng remarked.

The global financial crisis 10 years ago was different to the current Covid-19 in the sense that the former impacted the economy through financial channels, he explained. The Covid-19 outbreak has two issues, which are the economic impact and the virus itself, and the government is assessing various scenarios of how the outbreak can develop, which will be made public later, said Mr Heng.

Global cooperation with international organisations will be important, as well as the need for country cooperation in coordinating global monetary policy, improving testing and response, and providing timely information.

Mr Heng replied that the government is now prioritising on the managing the economic impact and curbing the outbreak when he was queried about how the situation will influence the timetable of the next general election.

“But the elections have to be called before April 2021, so we cannot deviate from that. And what we must do is to create the conditions that will allow us to manage the situation to the best of our ability… If you have big challenges ahead, then surely you want to be able to spend time on those challenges. Therefore the key question is, will the challenges be greater now or will the challenges be greater a year from now?” he concluded as he replied to additional queries by reporters.

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