Then Finance Minister Heng Swee Keat disagreed.
Where to draw the line for borrowing?
‘Soft infrastucture’ is a nice name to coin, he said. It makes for an alluring, populist argument to argue for borrowing instead of collecting taxes to fund public services.
But if clear lines are not drawn in defining ‘infrastructure’, then almost anything from defence, to cybersecurity, health care, education and social spending could be described as “soft infrastructure” spending as these are all about human capital. Where then will we stop at borrowing to fund ‘soft infrastructure’?
More than 30% of expenditure each year goes to education and healthcare. If Singapore borrows every year to fund such spending, the debt burden will go up over time. Future generations will end up paying the heavy price.
Interest rates are low for now, but this can change quickly and when they change, existing debts have to be refinanced and a higher interest rate could quickly worsen the fiscal situation, Mr Heng said.
One year later, Mr Heng’s words proved to be prophetic. Interest rates have been rising and still rising.
This prudent approach has earned them a triple-A credit rating by major credit rating agencies in the world. The Government’s prudent stewardship of our reserves is why Singapore is probably the only country in the world that has not needed to borrow to support both people and businesses during this pandemic. Which means no debt burden for Singaporeans to bear.