Finance Minister Tharman Shanmugaratnam announced the government's $20.5 billion Resilience Package at today's Budget speech in Parliament.
He said that Singapore was likely to experience the deepest recession since independence, arising from the worst global economic decline in 60 years.
The Resilience Package has three major aims: to save jobs to maximum possible extent, to help viable companies stay afloat, and to prepare Singapore to return with strength.
The Package has five main components:
1) Jobs for Singaporeans: $5.1 billion to preserve jobs
2) Stimulating bank lending : extend $5.8 billion government capital for risk sharing initiative (SRI). Some are to be used for provisions of losses.
3) Enhance business cash flow & competitiveness $2.6 billion
4) Supporting families $2.6 billion
5) Building a home for the future: $4.4 billion
Jobs for Singaporeans
The government will also be spending another $4.5 billion on a jobs credit scheme to provide companies with cash grants to retain workers.
Jobs credit will provide a cash grant for employers consisting 12% of the first $2,500 of each employee on CPF payroll.
Government will be giving $150 million help lower income workers through a special Workfare Income Supplement Scheme (WIS) payment.
Another $150 million will be spent on enhancing the Skills Programme for Upgrading and Resilience (SPUR) to help re-train Singapore workers.
In addition, the civil service will be taking this opportunity to attract talent. The finance minister announced that 18,000 public sector jobs to be made available in next 2 years.
Stimulating bank lending
The government has decided to take on a significant share in the risks of bank lending. They will do so under a new Special Risk-Sharing Initiative (SRI), which will have two components:
New bridging loan programme
The new programme will substantially enhance the original scheme introduced in November. This will cater to loans of up to $5 million (up from $500,000 currently). This should meet the working capital needs of most small to mid-sized firms, as well as some bigger ones.
The new BLP will apply to all new loans from 1 February 2009, and will include refinancing of existing loans when they fall due. The scheme will be in operation for one year in the first instance and cater to loans of up to four years maturity.
The new BLP will apply to all new loans from 1 February 2009, and will include refinancing of existing loans when they fall due. It will be in operation for one year, with a possible extension of one year if the situation warrants. The scheme will cater to loans of up to four years maturity.
The Government will step in to share the risk for trade financing, including 75% for trade loans. This is important for companies that already have orders, who need loans to fulfill their orders as well as insurance against the risk of their buyers defaulting on payments..
The Finance Minister will also extend the tax deduction on loss provisions made pursuant to Monetary Authority of Singapore (MAS) Notice 612 for banks, as well as other equivalent MAS notices for finance companies and merchant banks, for three Years of Assessment.
This will "encourage banks to continue making adequate loan impairment provisions and bolster their financial strength to underpin continued lending in the downturn."
The SRI and other enhancements the government is making could lead to $11 billion of loans this year, including $5.8 billion of government capital. The government expects the banks to take advantage of the schemes and play their part to ensure that viable companies get adequate funding to see them through the crisis.