Channel NewsAsia: Dipping into reserves needed to deal from position of strength

By Asha Popatlal

SINGAPORE: Dipping into Singapore’s reserves for the Budget is necessary as it allows the government to deal with the current economic crisis from a position of strength.

Without doing so, the government might not have been able to do as much as it did, explained Finance Minister Tharman Shanmugaratnam as he wrapped up three days of debate on the Budget Statement

The government’s decision to tap on past reserves was a hot issue during the debate.

Members of Parliament raised a host of questions: Why dip into the reserves now? Why not use existing funds first? How was it done? What benchmarks were being set?

Explaining, Mr Tharman said the move was to signal Singapore’s intention to deal with the situation with all the resources at its disposal, without the need to borrow.

Without the confidence of additional resources, the government may have had to curtail the help measures.

Mr Tharman also laid out the principles for seeking the President’s approval.

“First, a government should only draw on past reserves in very exceptional situations, for example, when external events or crises pose a threat to Singapore’s economy or society. Second, the measures to be funded should be of a temporary nature,” he said.

But the minister stressed that it was not possible to define strict indicators for drawing on reserves as it was not possible to define rules that meet all circumstances.

He also did not rule out the possibility of the government of the day needing to tap on reserves again in this lifetime.

As a precautionary measure, the President’s nod is needed as the second key to open the reserves after the government turns the first key. The process to do this was another hot issue.

Mr Tharman said: “Did the President have the full opportunity to properly evaluate the proposal? Or was it a fait accompli?”

Revealing details for the first time, Mr Tharman said the Budget was finalised a fortnight before Budget Day.

The Cabinet approved it one week before Budget Day. But before that, the Prime Minister met the President informally to sound him out and to give him time to think about it.

The Ministries of Finance, and Trade and Industry, followed up with detailed briefings for the President and his Council of Presidential Advisers.

Once the numbers were finalised, a formal request was sent so that the President and the Council could come to a decision.

But, questions remained.

“The concern arises over the way the 2-key system operates. It seems the 2-key system operates simultaneously at the same time. When the government key says “unlock”, the other key unlocks automatically,” said Low Thia Khiang, MP for Hougang.

Mr Tharman said: “This is not a ‘wayang’ (show)… The point is: the President, advised by the CPA (Council of Presidential Advisers), makes an independent and careful judgement on the government’s case.”

MP for Tampines GRC, Irene Ng, said: “Can I ask the minister whether the process can be refined and improved further so that in future we can make the process more transparent – that the public knows that the institution of the President is one that is strong, and that it can exercise an independent turn of the key.”

Inderjit Singh, MP for Ang Mo Kio GRC, said: “What’s missing is the process that the President took after he got briefed by the government. If we could get a sense of what they discussed and what process they went through to decide, then this may clear many of these questions.”

But Mr Tharman said: “I’m not sure why it is relevant. At the end of the day, this is a system that is different from Norway and Australia, where as much detail as possible is provided.

“This is a system that relies on trust in the individuals who are in charge, including those appointed to the CPA and the Elected President. Do you trust them? Have they made decisions wisely? Has the government been acting responsibly?”

Mr Tharman said once Parliament approves the Budget, the government will seek the President’s formal approval to draw from the reserves. The President’s decision will then be gazetted, as required under the Constitution.

– CNA/ir

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Posted in 2009 02. Comments Off on Channel NewsAsia: Dipping into reserves needed to deal from position of strength
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