First drawdown of national reserves

Singapore Infopedia

by Chew, Valerie


Singapore’s national reserves, or net assets, are a vital strategic resource for the country, and are therefore strictly protected by the Constitution.1 Specifically, the Constitution safeguards the portion deemed to be “past reserves” – reserves that were not accumulated by the government during its current term of office – by requiring the government to obtain the President’s approval before drawing on such reserves.2 The constitutional safeguards came into effect in 1991 but were invoked for the first time only in January 2009, when the government sought to use past reserves to fund special Budget measures to mitigate the effects of the looming recession.3 The President gave his in-principle approval for the drawdown on 21 January 2009, the day before Budget 2009 was delivered in Parliament.4

Although this was the first time the government had asked the President to approve a proposal to spend past reserves, it was not the first time the issue of spending reserves was raised.5 Opposition Members of Parliament and members of the public have often questioned the government’s continual accumulation of reserves with no apparent intention or plan to use them.6 Throughout the years, there have been several calls for the government to spend past reserves on the needs of the current generation.7

The government had resisted dipping into past reserves, even during economic downturns. In early 1999, then President Ong Teng Cheong had said that he would approve the government’s request to draw on past reserves to finance recession measures, if asked. However, then Prime Minister Goh Chok Tong said there was no need to, as the government had accumulated enough funds in current reserves.8 In November 2001, then Deputy Prime Minister Lee Hsien Loong raised the possibility of having to use past reserves to deal with the recession, but this again turned out to be unnecessary.9

However, in 2008, amid the global financial meltdown, the government announced in October that up to S$150 billion of past reserves had been set aside to guarantee deposits in Singapore until the end of 2010.10 The guarantee covered all Singapore dollar and foreign currency deposits of individual and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore (MAS). The move did not constitute an actual draw on the reserves, as the funds would be used only if a depository financial institution failed. The primary aim was to give the banks in Singapore a level playing field with those in countries where the government had introduced similar guarantees, including Hong Kong and Australia.11

Then, in January 2009, faced with a fast deteriorating global economic environment and the prospect of a deep and prolonged recession, the government finally sought the President’s approval to take out S$4.9 billion from past reserves to fund two one-off measures to boost the economy – the Jobs Credit scheme and the Special Risk-Sharing Initiative (SRI).12 The bulk of this sum, S$4.5 billion, was to go into the Jobs Credit scheme, which was designed to encourage employers to retain their workers by giving them a cash grant for every local employee on their payroll.13 The remainder, S$388 million, was to be used for the SRI, which was aimed at encouraging banks to lend to companies by bearing a larger share of the risks.14

Process of unlocking past reserves
In August 2008, at the President’s request, officials from the Ministry of Trade and Industry (MTI), Ministry of Finance (MOF), MAS, Government of Singapore Investment Corporation and Temasek Holdings began giving the President and the Council of Presidential Advisers (CPA) periodic briefings on global economic trends and the impact on Singapore.15

In January 2009, while the Cabinet considered the proposed Budget 2009, Prime Minister Lee Hsien Loong informally discussed with the President the government’s need to use past reserves to support the Budget measures.16 The President agreed “to give every consideration to the proposal when it was submitted to (him)”.17 The Cabinet approved the Budget the week before it was to be presented in Parliament (22 January 2009). Soon after, the government gave two detailed briefings to the President and the CPA. The first briefing, given by MTI and MAS, was on the global economic and financial situation and the implications for Singapore. The second briefing, given by MOF, explained the Jobs Credit scheme and SRI in detail, and the reasons for using past reserves to fund them.18

After the costs for the two schemes had been finalised, Minister for Finance Tharman Shanmugaratnam sent a formal request to the President in a letter dated 19 January 2009.19 The President’s Office received the letter the next day, following which the CPA further discussed the issue and recommended that the President give his in-principle approval.20 The President accepted the recommendation and gave his in-principle approval on 21 January 2009.21

Parliament passed the Supply Bill and the Supplementary Supply (FY 2008) Bill on 13 February 2009, thus approving the Budget.22 As with all other Bills passed by Parliament, the President’s assent was required.23 The President gave his assent to both the Supply Act 2009 and the Supplementary Supply (FY 2008) Act 2009 on 9 March 2009, effectively giving his formal approval for the drawdown of past reserves amounting to S$1.1 billion for FY 2008, and S$3.8 billion for FY 2009.24

Factors considered
There are no definitive rules on when the government may tap on past reserves.25 However, the government’s decision was based on two considerations, as explained clearly by the Minister for Finance in his Budget Debate Round-Up Speech 2009:

“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. The current severe global economic crisis is a clear example of this. Second, the measures to be funded out of past reserves should be of a temporary nature and not built into continuing government programmes. The Jobs Credit and the Special Risk-Sharing Initiative for bank lending are distinguished from regular budgetary interventions during a typical downturn, such as tax rebates or increased social spending".26

Having been fully briefed by the government on the economic situation, and aware of the urgent need to restore confidence, the President and the CPA then accepted the government’s proposal.27

In the end, the final amount drawn by the government was $4 billion for the two schemes. The amount drawn was returned to the reserves in 2011.28


Valerie Chew

1. “Concerns about Economy Go Back to Mid-2008,” Straits Times, 18 February 2009, 8. (From NewspaperSG); “Budget Speech 2009,” Ministry of Finance, 22 January 2009, 57, last retrieved 4 October 2016.  
2. “Secure Singapore,” Ministry of Finance, 11, last retrieved 4 October 2015; Chua Mui Hoong, “Reserves – President’s Support,” Straits Times, 10 March 1999, 1. (From NewspaperSG)
3. Ministry of Finance, “Budget Speech 2009”; Chua Mui Hoong, “Turning of the Second Key Went Smoothly,” Straits Times, 20 February 2009, 2. (From NewspaperSG)
4. Jeremy Au Yong, “President Gives Formal Approval for Draw on Past Reserves,” Straits Times, 13 March 2009, 3; Sue-Ann Chia, “Why I Said Yes,” Straits Times, 18 February 2009, 1; Jeremy Au Yong, “Govt Details Steps Leading to President’s OK,” Straits Times, 6 February 2009, 1. (From NewspaperSG)
5. “Concerns about Economy Go Back to Mid-2008.”
6. Parliament of Singapore, Government Reserves (Target for Optimum Amount), vol. 73 of Official Reports – Parliamentary Debates (Hansard), 25 September 2001, cols. 2068–2069, last retrieved 4 October 2016.
7. “Concerns about Economy Go Back to Mid-2008.”
8. “Reserves – President’s Support,”
9. Chuang Peck Ming, “S’pore May Tap Reserves for First Time,” Business Times, 24 November 2001, 1. (From NewspaperSG)
10. “Move by Singapore’s Government to Guarantee Deposits Welcomed,” Channel NewsAsia, 17 October 2008 (From Factiva via NLB’s eResources website); Siow Li Sen, “Bank Deposits Get Govt Seal of Guarantee,” Business Times, 17 October 2008, 1; Li Xueying, “Tapping Reserves: Many Back Move,” Straits Times, 25 January 2009, 4. (From NewspaperSG)
11. “Move by Singapore’s Government to Guarantee Deposits Welcomed”; Siow, “Bank Deposits Get Govt Seal of Guarantee.”
12. Au Yong, “Formal Approval for Draw on Past Reserves”; “Concerns about Economy Go Back to Mid-2008”; Li, “Tapping Reserves: Many Back Move”; Au Yong, “Govt Details Steps Leading to President’s OK”; Sue-Ann Chia, “Reserves: Govt Not Breaking Piggy Bank,” Straits Times, 2 February 2009, 4. (From NewspaperSG)
13. Ministry of Finance, “Budget Speech 2009,” 14; Au Yong, “Formal Approval for Draw on Past Reserves”; “Budget Debate Round-Up Speech 2009,” Ministry of Finance, 5 February 2009, 74–76, last retrieved 4 October 2016.
14. Au Yong, “Formal Approval for Draw on Past Reserves”; Ministry of Finance, “Budget Speech 2009,” 20–21.
15. “Concerns about Economy Go Back to Mid-2008.”
16. Au Yong, “Formal Approval for Draw on Past ReservesAu Yong, “Govt Details Steps Leading to President’s OK”; Ministry of Finance, “Budget Debate Round-Up Speech 2009,” 86.
17. Sue-Ann Chia, (2009, February 18). “Why I Said Yes,” Straits Times, 18 February 2009, 1; “Concerns about Economy Go Back to Mid-2008.”
18. Ministry of Finance, Budget Debate Round-Up Speech 2009,” 86–87; Au Yong, “Govt Details Steps Leading to President’s OK”; “Concerns about Economy Go Back to Mid-2008.”
19. Au Yong, “Formal Approval for Draw on Past Reserves”;  “Concerns about Economy Go Back to Mid-2008”; Ministry of Finance, Budget Debate Round-Up Speech 2009,” 87.
20. Chia, “Why I Said Yes”; “Concerns about Economy Go Back to Mid-2008.”
21. Au Yong, “Formal Approval for Draw on Past Reserves”; “Concerns about Economy Go Back to Mid-2008”; Au Yong, “Govt Details Steps Leading to President’s OK”; Ministry of Finance, Budget Debate Round-Up Speech 2009,” 87.
22. Chia, “Why I Said Yes”; Au Yong, “Formal Approval for Draw on Past Reserves.”
23. “Functions,” Parliament of Singapore, last updated 13 April 2011.
24. Au Yong, “Formal Approval for Draw on Past Reserves”; Ministry of Finance, “Budget Speech 2009”, 55–56.
25. Ministry of Finance, Budget Debate Round-Up Speech 2009,” 84.
26. Ministry of Finance, Budget Debate Round-Up Speech 2009,” 84.
27. Chia, “Why I Said Yes”; Ministry of Finance, Budget Debate Round-Up Speech 2009,” 87.
28. Aaron Low, “Govt to Return $4b to National Reserves,” Straits Times, 9 February 2011, 2. (From NewspaperSG)

The information in this article is valid as at 9 January 2017 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.


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