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Parliamentary Reply regarding $22 billion loan capital by DPM Heng to NCMP Leon Perera

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During the Parliamentary Session on 4th June 2020, NCMP Leon Perera has put across a question to DPM Heng regarding Budget Deficit Forecast for FY 2020/2021.

“To ask the Deputy Prime Minister and Minister for Finance (a) whether he can provide an updated budget deficit forecast for FY 2020/2021, after the main Budget and supplementary Budget statements up to and including 26 May 2020; (b) how much of this is financed via a reserves drawdown, by utilising the accumulated surplus from the current term of Government and by other means, respectively; and (c) what is the nature of the other means of financing, if any.”

Parliamentary Question by NCMP Leon Perara, 4th June 2020

DPM Heng Swee Keat provided a reply:

“The four Budgets in 2020 has deployed a total of $92.9 billion to support our economy and society in fighting COVID-19, and to position ourselves to emerge stronger. The Overall Budget Deficit for FY2020 is $74.3 billion or 15.4% of GDP.

The Government will draw $31 billion from past reserves to fund the measures announced in the Fortitude Budget. Taken together with the earlier $21 billion draw from past reserves for the Resilience and Solidarity packages, we are drawing a total of up to $52 billion from past reserves to fund Singapore’s response to the COVID-19 pandemic. Loan capital, which we expect to be repaid in the future and is hence fiscally neutral, makes up $22 billion of the total COVID-19 package. The remainder will be funded by the Government using current reserves. This comprises the accumulated surplus in this term of Government, including expected fiscal upside from FY2019 revenue and expenditure updated after the close of the financial year.

Singapore’s fiscal response to COVID-19 is significant and we are able to do so as we have been prudent and have accumulated surpluses over the years. Our reserves are our strategic asset, built up through the discipline and prudence of our people and political leaders, across generations. Because we have prepared ourselves well, Singapore has the resources to meet this crisis with confidence.”

Source: Ministry of Finance

Controversy Over Parliamentary Reply

Mr Leon Perera had put out a Facebook Post commenting on the reply from DPM Heng. A particular part of the reply was highlighted. Netizens were quick to comment on the issue.

Loan capital, which we expect to be repaid in the future and is hence fiscally neutral, makes up $22 billion of the total COVID-19 package.

DPM Heng Swee Keat, 4th June 2020

This sentence gives the impression that a loan is to be made and repaid. However, it does not describe who is the lender or who is lending.

Netizens have interpreted the sentence to mean that the Singapore Government will be loaning $22 billion and repaying it sometime in the future, to finance the existing budget.

Singapore Government Issues Clarification

At about 10pm on 22nd June 2020, the Singapore Government posted a clarification on Gov.sg, explaining that the “$22 billion loan capital” refers to $22 billion set aside in the budget for financing businesses.

It does not refer to the Government loaning $22 billion to finance the budget.

Almost a quarter of the Budget 2020 will be dedicated to sustaining businesses to retain jobs and will form a key strategy in helping Singapore overcome the economic downturn brought on by the COVID-19 pandemic.

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