Government dips into reserves for 1st time
$20.5 billion Resilience Package revealed
22 January 2009
By John Yap
In an unprecedented move, the government has dipped into its large reserves to cope with the financial crisis, with approval from the President. In his Budget Speech in Parliament on Thursday, Finance Minister Tharman Shanmugaratnam revealed a Resilience Package, saying that the purpose for dipping into the reserves was to “[help] our people now and secure the future for ourselves”.
The Resilience Package, when implemented, will cost the government $20.5 billion, with $4.9 billion coming from the country’s reserves, leaving the island nation with an $8.7 billion deficit, the largest in its history. The Package, said the Finance Minister, would consist of 5 components, mainly creating jobs for Singaporeans, stimulating bank lending, enhancing business cash-flow and competitiveness, supporting families and building a home for the future. “The Package”, said the Finance Minister, “aims to save jobs to the maximum extent possible in the recession, and to help viable companies stay afloat. It also prepares Singapore to emerge with strength when the global economy recovers, and enhances our capabilities and competitiveness for the long term.”
This package promises a lot for Singaporeans including a $4.5 billion Jobs Credit plan to help lower the cost of keeping workers during this recession.
This plan will last for a year and 12% cash grant on the first $2,500 of each month’s wages for each employee on their CPF payroll will be paid out very quarter, starting from March. The grant will be equivalent to a nine percentage point cut in the employers' contribution rate to the Central Provident Fund (CPF). The plan will “encourage our businesses to preserve jobs as much as is possible in the downturn”' said Mr Tharman.
A special Risk Sharing Initiative, ensuring that viable companies continue to have access to credit to sustain their operations and keep jobs, has also been introduced. By the Loan Insurance Scheme and the Trade Credit Insurance Programme, the government aims to improve access to working capital, sharing most of the risks in financial financing.
- Mr. Tharman outlining the Resilience Package in Parliament
There are also more measures to come, with Mr. Tharman promising that the government "would be ready to undertake further measures if necessary over the course of the year and the next few years”.
Despite this however, Mr. Tharman remains cautious. “'The resilience package will not get us out of recession, but it will help avert an even sharper downturn, and more lasting damage to the economy.”
Mr. Thaman’s announcing of this budget has been mostly greeted with a similar response.
“It will not produce a fundamental turnaround for the economy of course but will help cushion some of the pain.” said Mr. Kit Wei Xin, economist at Citi Group “It's a big bang budget I will call it - most likely funded by the fiscal reserves although we will have to wait for further details.”
Added Ms. Tan Yen Yen, chairman of the Singapore infocomm Technology Association “[The association] welcomes the tax reductions, rental rebates and job credits that allow Singapore to be competitive as an ICT hub and remain attractive for foreign companies.”
Voiced Mr. Song Seng Wun, CiMB-GK economist “[The package is] too focused in terms of targeting specific areas, rather than taking a helicopter approach of helping everyone in this kind of a worst-case scenario of a 5% contraction.”
Singapore financial markets also gave a muted reaction to the announcement, with the Straits Times Index (STI) registering about 1,685 pts at press time.
22 January 2009
By John Yap
In an unprecedented move, the government has dipped into its large reserves to cope with the financial crisis, with approval from the President. In his Budget Speech in Parliament on Thursday, Finance Minister Tharman Shanmugaratnam revealed a Resilience Package, saying that the purpose for dipping into the reserves was to “[help] our people now and secure the future for ourselves”.
The Resilience Package, when implemented, will cost the government $20.5 billion, with $4.9 billion coming from the country’s reserves, leaving the island nation with an $8.7 billion deficit, the largest in its history. The Package, said the Finance Minister, would consist of 5 components, mainly creating jobs for Singaporeans, stimulating bank lending, enhancing business cash-flow and competitiveness, supporting families and building a home for the future. “The Package”, said the Finance Minister, “aims to save jobs to the maximum extent possible in the recession, and to help viable companies stay afloat. It also prepares Singapore to emerge with strength when the global economy recovers, and enhances our capabilities and competitiveness for the long term.”
This package promises a lot for Singaporeans including a $4.5 billion Jobs Credit plan to help lower the cost of keeping workers during this recession.
This plan will last for a year and 12% cash grant on the first $2,500 of each month’s wages for each employee on their CPF payroll will be paid out very quarter, starting from March. The grant will be equivalent to a nine percentage point cut in the employers' contribution rate to the Central Provident Fund (CPF). The plan will “encourage our businesses to preserve jobs as much as is possible in the downturn”' said Mr Tharman.
A special Risk Sharing Initiative, ensuring that viable companies continue to have access to credit to sustain their operations and keep jobs, has also been introduced. By the Loan Insurance Scheme and the Trade Credit Insurance Programme, the government aims to improve access to working capital, sharing most of the risks in financial financing.
- Mr. Tharman outlining the Resilience Package in Parliament
There are also more measures to come, with Mr. Tharman promising that the government "would be ready to undertake further measures if necessary over the course of the year and the next few years”.
Despite this however, Mr. Tharman remains cautious. “'The resilience package will not get us out of recession, but it will help avert an even sharper downturn, and more lasting damage to the economy.”
Mr. Thaman’s announcing of this budget has been mostly greeted with a similar response.
“It will not produce a fundamental turnaround for the economy of course but will help cushion some of the pain.” said Mr. Kit Wei Xin, economist at Citi Group “It's a big bang budget I will call it - most likely funded by the fiscal reserves although we will have to wait for further details.”
Added Ms. Tan Yen Yen, chairman of the Singapore infocomm Technology Association “[The association] welcomes the tax reductions, rental rebates and job credits that allow Singapore to be competitive as an ICT hub and remain attractive for foreign companies.”
Voiced Mr. Song Seng Wun, CiMB-GK economist “[The package is] too focused in terms of targeting specific areas, rather than taking a helicopter approach of helping everyone in this kind of a worst-case scenario of a 5% contraction.”
Singapore financial markets also gave a muted reaction to the announcement, with the Straits Times Index (STI) registering about 1,685 pts at press time.
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