Singapore will for the first time tap its vast financial reserves, as part of measures to fight what is likely its worst-ever recession, the finance minister said Thursday.

"The president has given his in-principal approval to fund $4.9 billion worth of recession-relief measures from the reserves," Finance minister Tharman Shanmugaratnam said during his budget speech in parliament.

The unprecedented dip will help to fund the Resilience Package, totalling $20.5 billion - the largest the Singapore government has undertaken in response to an economic downturn.

In presenting the Budget, Mr Tharman said: "This is not a normal Budget. It is a not even a normal counter-cyclical Budget."

This year's Budget will include a cash grant for all businesses to retain workers and a special initiative to stimulate bank lending. The $4.9 billion dip into the reserves will fund these temporary extraordinary measures.

The deficit for the fiscal year ending March 2010 will be Singapore's largest ever at about 6 per cent of gross domestic product, though drawing on past reserves will reduce the gap to about $8.7 billion, or 3.5 per cent of GDP.

This is a substantial increase from the 2008/2009 budget deficit which will be about $2.2 billion or 0.8 per cent of GDP.

However, the finance minister also assured Singaporeans that the government will not be compromising on long-term investment while reacting to the immediate needs of businesses and households.

Singapore's reserves include assets managed by the Government of Singapore Investment Corp and Temasek Holdings. Singapore's official foreign reserves were $234.5 billion in 2007.

The Resilience Package includes $5.1 billion for training and other measures to save jobs, $5.8 billion to stimulate bank lending, $2.6 billion in direct assistance for Singaporeans and $2.6 billion for education, healthcare and infrastructure among other measures.

The Budget also lowered corporate tax from 18 per cent to 17 percent, bringing it just 0.5% shy of Hong Kong's 16.5 per cent.

(Additional reporting from AFP and Reuters)