The first step to addressing a crisis is to determine the depth and intensity of its impact. Challenges occur in the life of nations as much as in those of individuals. But are they of a magnitude that demands an extraordinary response? Few would doubt that the coronavirus pandemic is a crisis of that order: It has the effect of threatening the very survival of Singapore. The threat is constituted primarily by the medical nightmare posed by Covid-19. It stirs memories of the 1918 Spanish flu, the 1957 Asian flu and, more recently, the 2003 Sars outbreak and 2009 H1N1 virus. Meeting this latest challenge has resulted in the need to adopt drastic measures via a circuit breaker to break the chain of transmission – but this has also dealt a severe blow to the economy.
The challenge now is to resuscitate and rejuvenate the economy and society so Singaporeans can gear up for a recovery phase. That is no small order given that the rest of the world, too, is attempting to return to a semblance of normalcy. No one knows how long the pandemic will last nor what the ultimate economic cost will be. But there are sobering warnings that the world is in the worst period of economic decline since the Great Depression of the 1930s. This is why a decision to use the reserves has been deemed necessary, to help Singapore get through an existentially destabilising era. Singaporeans understand that the reserves are a critical resource, a strategic asset that serves to provide a key plank of defence in times of severe dislocation.
The investment of the reserves has created a steady source of income that, in the form of the Budget, can be spent on or invested for current and future generations. Such objectives underpin the fiscal prudence that is at the heart of Singapore’s economic philosophy. To draw on the reserves at the first sign of financial trouble or to meet populist demands would undermine their objective of being a saving for the long-term well-being of the nation. Any decision to draw on them requires careful consideration, and is never taken lightly. The reserves must be used only in extremis. This is what has happened now.
The onset of the Covid-19 outbreak here and its prolonged effects made for an unprecedented crisis and a highly uncertain outlook for the country. President Halimah Yacob has already given her assent for about $21 billion to be drawn from the reserves to fund three support packages for businesses and workers that amount to $63.7 billion. The Government will announce more measures tomorrow for those unable to resume activities after the circuit breaker ends on June 1. This could require drawing on the reserves again. These actions, while a marked departure from the practice of fiscal conservatism associated with Singapore, underscore the need for a swift and decisive response when faced with an unparalleled crisis.
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