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January 19, 2009

Singapore may have to turn to reserves amid recession
Singapore is considering dipping into its foreign reserves for the first time to help tackle an economic slump, reported Reuters quoting the Business Times newspaper report Monday.

Senior Minister Goh Chok Tong said that Prime Minister Lee Hsien Loong and Finance Minister Tharman Shanmugaratnam are considering whether to make the move, after a plunge in Singapore's trade pointed to a gloomier economic picture.

"It's a difficult decision -- because once you do that, you open the reserves to future demands which may not justify the use of the reserves," Goh, a former prime minister, told reporters on Sunday, the newspaper said. "We've always said 'the reserves are for a rainy day'.

If this is not a rainy day, I don't know what is a rainy day," the newspaper quoted Goh as saying. Thirty percent of the cranes at the Port of Singapore Authority were sitting idle, he noted.

Singapore's foreign reserves totalled $174.2 billion in December, the central bank said earlier this month. The central bank steers monetary policy by managing the Singapore dollar within an undisclosed trading band. Asked how much should be drawn from the reserves, Goh said it depended on the measures that would justify the use of the reserves.

Singapore will announce on Thursday a budget that is expected to be expansionary. Goh said the focus would be on saving jobs, after the export-dependent country was the first in Asia to fall into recession last year.

Many governments around the world have launched massive economic stimulus plans in recent months a bid to stave off more job losses and prevent an even deeper and longer recession. Both the United States and Britain are expected to announced further spending plans this week.

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