G. Fiscal Outlook
- 303 Sir, let me now go through our fiscal outlook.
- 304 At the onset of COVID-19 in FY2020, we were looking to draw up to $52 billion from Past Reserves to protect lives and livelihoods. Given the uncertainty of the crisis at that time, we had to set aside sufficient resources to handle any downside scenarios.
- 305 We now expect to utilise a lower amount of $31.9 billion from Past Reserves for COVID-19 relief in FY2020. This is the result of our swift and decisive response, which allowed us to avert worse public health outcomes. We saw a stronger-than-expected rebound in our economy and businesses, and did not need to utilise measures like loan loss provisions which we had set aside.
- 306 For FY2021, we had planned to draw up to $11 billion from Past Reserves for the COVID-19 Resilience Package. We now expect to draw a lower amount of $5 billion from Past Reserves. This is mainly due to a reduced expenditure of $10 billion for the COVID-19 Resilience Package, underutilisation of Ministries’ expenditures primarily due to projects delayed by COVID-19, as well as one-off revenue upsides including from Vehicle Quota Premiums and stamp duties.
- 307 We also tapped on our existing resources first to provide short-term relief when we had to tighten restrictions periodically last year. For example, the $2 billion worth of economic relief measures introduced during the Heightened Alerts last year was resourced through a reallocation of funds.
- 308 During the Stabilisation Phase, we introduced $1.4 billion worth of support measures. For timely implementation of these measures, we took an advance from the Contingencies Fund. I will now replace the advances through the Supplementary Budget for FY2021.
- 309 For FY2022, we will set aside $6 billion to maintain a multi-layered public health defence.
- a. This is necessary for us to react nimbly and confidently to the evolving COVID-19 situation.
- b. Given the extraordinary nature of this pandemic, we will resource this COVID-19 public health expenditure for FY2022 from Past Reserves.
- c. The President has given her in-principle support for this.
- 310 This brings the total expected draw on past reserves over FY2020 to FY2022 to up to $42.9 billion. This cumulative draw is less than the initial draw of $52 billion that the President had originally agreed to for FY2020. It reflects our prudence in the use of Past Reserves. (See Annex G-1.)
- 311 Beyond the crisis, our spending needs will continue to grow, as we tackle structural shifts and invest more to deliver on our longer-term priorities as I have laid out just now.
- 312 In order to meet new spending needs, besides raising revenue, we will continue to manage our expenditure growth. Since FY2017, we have implemented a 2% cut in the budgets of all Ministries and Organs of State to ensure we spend judiciously and achieve good value-for-money outcomes. From FY2023, I will apply a further 1% cut to the budgets of Ministries and Organs of State. Funds from this adjustment will be channelled towards new priorities.
FY21 and FY22 Overall Fiscal Position
- 313 Let me now summarise our overall fiscal position. For FY2021, I expect an overall deficit of $5 billion or 0.9% of GDP.
- 314 For FY2022, our budget remains expansionary to support the economy. I expect an overall deficit of $3 billion or 0.5% of GDP. (See Annex G-2.)