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P. R. Venkat
The Wall Street Journal
The Singapore government Friday announced a 6.6 billion Singapore dollar (US$5.2 billion) package to enable its citizens to overcome inflationary pressures caused by rising commodity prices and wages.
“Inflation is a key concern for everyone this year,” Finance Minister Tharman Shanmugaratnam said in his budget speech in Parliament.
The package includes S$3.2 billion in tax rebates and cuts for households, and S$3.4 billion for long-term social investments.
“As a country that imports all we consume, we will always be vulnerable to inflation abroad. This time around, it is mainly food, utilities and other fuel-related charges that are concerning most Singaporeans,” Mr. Tharman said.
Inflation is a concern around Asia, where soaring commodities prices have stoked broader price pressures and prompted authorities to shift priorities from promoting economic growth to containing inflation.
The first approach of the Singapore government is to seek to moderate medium inflationary pressures through the Singapore dollar exchange-rate policy of the central bank.
However, he said using the exchange rate to offset sudden spikes in prices, such as that of oil over the past six months, would require appreciation of the Singapore dollar.
“This would disrupt our exporters,” he said.
The minister also announced one-off measures such as 20% corporate income-tax rebates and cash grants for small and medium enterprises. These measures will cost the government S$560 million.
For the 2010 fiscal year that ends March 31, the government expects the overall budget deficit to be S$300 million or 0.1% of gross domestic product, compared with S$3 billion projected last year.