SINGAPORE: President Halimah Yacob has given her in-principle support for Singapore to draw on its past reserves, as part of a second assistance package in response to the COVID-19 pandemic.
In a message to Parliament - delivered by Speaker of Parliament Tan Chuan-Jin on Thursday (Mar 26) - the President said her support was given after careful deliberations, “considering the grave circumstances and highly uncertain outlook”.
Since the reserves protection framework was established in 1991, past reserves had been drawn on only once before, during the global financial crisis of 2009, when they were used to fund part of the Resilience Package at the time.
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Former President S R Nathan had approved drawing S$4.9 billion to fund “two temporary and extraordinary measures”, noted Madam Halimah, referring to two schemes aimed at helping workers stay employed and helping companies get credit.
“Apart from helping to avert an even sharper downturn and prevent a permanent damage to our economy, that draw was an instructive one on how we could operationalise the reserves protection framework,” she said.
She noted that at the time, the Government had also sought Mr Nathan’s approval to use S$150 billion of reserves to back the Deposit Guarantee Scheme, where all bank deposits in Singapore would be backed by past reserves.
However, the guarantee was not triggered, and there was no draw on past reserves, she added.
Madam Halimah said she agreed with Prime Minister Lee Hsien Loong that a message should be sent to Parliament stating her views on the proposed draw on past reserves.
“In particular, I want to share my considerations on whether the proposed draw is necessary, whether the measures will be effective and whether the process by which the Government has engaged me was a reasonable one,” she said.
She noted though that her views were not meant to influence the Parliamentary debate on the assistance package.
“I urge honourable members of this House to debate the package rigorously and help sharpen the proposed measures, because ultimately we are all trying our best for Singapore and Singaporeans,” she said.
Madam Halimah stated that her custodial duty as president was “clear” under the Constitution.
“I have the responsibility and discretion to withhold my assent to budgets and expenditures that are likely to lead to a drawing on past reserves,” she said.
“The question is, are we now faced with such exceptional circumstances that I should allow the draw on past reserves?”
Though 2019 had ended on a “cautiously optimistic note” - with the global economy seeming set for recovery following subdued growth resulting from trade tensions between the United States and China - COVID-19 had changed that, she said, noting the situation by mid-February was already “rather gloomy”.
“When the Government came to brief me about Budget 2020, we discussed the option of drawing on past reserves if the situation worsens, but did not do it immediately as current reserves were still sufficient for the scale of the package envisaged then,” said Madam Halimah.
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However, this was followed subsequently by “successive waves of bad news”, with Europe becoming a new epicentre for COVID-19 and a growing number of cases in the US, even as the situation in China - where the coronavirus outbreak had originated - appeared to be stabilising.
Countries protecting their borders and locking down societies have had serious repercussions, with share markets worldwide falling sharply.
‘We are faced with a double whammy of a worldwide public health emergency and a deepening economic crisis. This downturn is likely to be deeper and last longer than SARS and the 2009 global financial crisis,” said the President.
The current economic shock is totally different from an ordinary business cycle downturn, she said, adding that it was clear that companies and workers were “suffering badly”.
“For example, the hotel occupancy rate is only 20 per cent currently. Many airlines, including SIA, have grounded almost all their planes due to massive flight cancellations. Many self-employed workers in the gig economy are not getting jobs. Production lines in factories are stalling due to supply chain disruptions, exacerbating their already tight cash-flow situation,” she noted.
Singapore must do its utmost to quickly help businesses and people, she said, describing it as a “matter of survival”.
“With the unprecedented and rapidly worsening of the global situation, the Government has assessed that we need to implement a substantial second support package swiftly to stabilise our economy, keep as many workers as possible employed and help viable enterprises to survive,” she said.
Madam Halimah described the second assistance package - which Deputy Prime Minister and Finance Minister Heng Swee Keat had already briefed her on - as a substantial one, “beyond the current reserves accumulated in this term of government”.
“Our reserves were built up over the years through prudent spending, and were set aside precisely to cater for rainy days,” she said. “The situation we are heading into looks more like a thunderstorm than a drizzle.”
The President said she had reviewed the Government’s proposal, together with the Council of Presidential Advisers (CPA), before arriving at the decision to give her in-principle support.
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They had agreed that the country needs to help companies - especially in areas such as aviation, travel and tourism, which have been badly hit - with their costs and cash-flow to keep them afloat.
“We also agree that our priority should be to help workers keep their jobs,” said Madam Halimah, adding she was “satisfied” with the process by which the Government had proactively reached out to her and the CPA in proposing the draw on past reserves.
She noted Prime Minister Lee and Deputy Prime Minister Heng had already discussed the possibility of such a draw a month ago.
“Two weeks ago, the Prime Minister sounded me out on the need for the second assistance package, which the Government was proposing to fund from a combination of current and past reserves,” she said.
Subsequently, various Government agencies had also briefed her and the CPA , and “comprehensively answered our queries”, she said.
Madam Halimah noted the Council had then deliberated on the proposal, and “unanimously recommended” that she give her in-principle support given the circumstances, noting the proposed measures were temporary.
“I have independently come to the same conclusion,” she said. “I have therefore given my in-principle support for the Government’s proposal to draw on its past reserves.”
She noted the due process following this would be that the Supplementary Estimates and Supplementary Supply (FY2020) Bill be passed in Parliament.
“If the Estimates and Bill pass the vote in this House, the Bill will be presented to me for the Presidential assent. At that stage, I will scrutinise it further, before giving my assent to the Bill,” she said.
“Mr Speaker and Honourable Members, we are facing an unprecedented crisis. The closest historical precedent was the Spanish Flu in 1918. But with globalisation and more interconnected economies and people, we can expect the economic impact to be far worse this time,” she said.
“COVID-19 causes deaths and suffering, so an economic cure though necessary is not sufficient. We also need a medical solution, as well as psychological and social ones,” she added.
“Understandably, we are uncertain about what lies ahead of us. But we should not be fearful. We have done well as a nation,” she said.
Madam Halimah noted Singapore’s response to COVID-19 was viewed as “being systematic and effective” by other countries, adding she was glad the country had banded together to fight the disease.
Singaporeans are responding calmly and responsibly. The Government has been open and transparent. And the community has stepped up to help those who may be more vulnerable. In these worst of times, I am heartened to see the best of Singaporeans,” said Madam Halimah
“I am confident that we will be able to get through this crisis together. It is not anybody’s wish for a crisis to befall us, but from time to time, it is inevitable,” she added.
“When it happens, how we respond will define us as a nation. So let us work together as one people and support one another on this journey. Let us overcome the crisis and emerge stronger and more cohesive as a nation.”