SINGAPORE - Monetary policy may be important, but the firepower to fight the Covid-19 pandemic comes from the Government's fiscal stimulus, Deputy Prime Minister and Minister for Finance Heng Swee Keat said yesterday.

"Our monetary and fiscal policies need to complement one another. (The latest action by the Monetary Authority of Singapore) looks at how we can maintain price stability, to maintain the conditions of longer-term growth," said Mr Heng in an interview with CNBC on Monday (March 30).

Earlier in the day, the Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool, eased its policy stance by setting the Singapore dollar's rate of appreciation at zero per cent at the prevailing lower level of its exchange rate policy band.

The move effectively lowers the mid-point of the policy band. The last time the central bank lowered the band's centre was during the global financial crisis in 2009.

Conventional monetary policy, like cutting interest rates, helps lower the cost of borrowing and servicing debt. But with no end in sight yet to the Covid-19 pandemic, governments around the world are finding that a more aggressive fiscal policy - from tax rebates to cash transfers - is needed to prop up businesses, preserve jobs and support livelihoods.

"MAS' action is absolutely a correct one," Mr Heng explained. "But the firepower for managing this has to be fiscal policy, and I'm very glad we have the past reserves."

Last week, President Halimah Yacob gave her in-principle support for the Government to tap Singapore's reserves - to the unprecedented tune of up to $17 billion - for a substantial aid package to deal with the pandemic.

Mr Heng had announced a supplementary budget introducing more than $48 billion in new and enhanced measures to protect jobs, help companies with immediate challenges, and strengthening economic and social resilience.

To CNBC presenter Martin Soong's question on whether a weaker Singapore dollar could be problematic given the country's dependence on imports, he said Singapore has been operating an exchange rate-centred policy for many years, including during the Asian financial crisis and global financial crisis.

"So we have an excellent team who are monitoring this very carefully, and I'm confident we have what it takes to guide this policy correctly, to the right level that will stabilise the economy and enable the efficient allocation of resources."

He expects Covid-19 to have a negative impact on government revenue, especially in areas such as stamp duties and property which are sentiment-driven. Investors will want to take a wait-and-see attitude, he said.

But Singapore's fundamentals remain strong, and the reasons companies want to invest in the country remain intact.

The post-Covid-19 world will be a "very different" one, hence it is important to put in place structural policies and look towards the future, he said, adding that sectors like pharmaceuticals, artificial intelligence and information and communications technology (ICT) will become more important.

The Future Economy Council, which he chairs, is tapping government and industry leaders on how the country can emerge stronger.

Meanwhile, the Government continues to take a risk-based approach, calibrating carefully between the two extremes of a complete lockdown and business-as-usual, he said.

On whether there will be more stringent measures, he said government agencies are watching the situation closely.

"We have been raising the precautionary measures as the situation deteriorates across the world. We will not hesitate (to take stricter measures) if there is a need.

"On the other hand, if each of us is socially responsible, many of these activities can still continue."

Singapore has not ordered a widespread lockdown as many cities and countries have done. But it has announced tighter measures in recent weeks, from closing its borders to certain visitors, to shutting bars and entertainment venues, and cancelling classes at tuition centres.

To CNBC presenter Sri Jegarajah's question on whether schools will close fully, he said: "This is not on the cards yet. But we want to be able to practise this, in case we have to." Schools will conduct one-day of home-based learning a week from this week.

Mr Heng declined to speculate on when the next general election - due by April 2021 - will be held, saying fighting Covid-19 "is the number one job today".

If the virus spreads to countries with less advanced healthcare systems, it will affect the economy and a whole range of activities, he said.

"The Prime Minister has indicated that he is considering different factors, and he has set out his considerations quite clearly.

"He has said that he has not decided, so we will have to continue to monitor and see what is the best thing to do, for Singapore, and Singaporeans."