The Monetary Authority of Singapore (MAS) has transferred $75 billion of excess official foreign reserves (OFR) to the government on April 7.
The transfer was done through a subscription of reserves management government securities (RMGS).
The transfer of assets does not change Singapore’s total foreign reserves or make available funds that the government can spend, says MAS through its statement on April 7.
In addition, the central bank explained that the OFR plays an “important role” in enabling the central bank to implement monetary policy and maintain financial stability in Singapore.
“MAS periodically assesses the optimal amount of OFR that is necessary to fulfil these objectives. The optimal amount of OFR that MAS estimates it needs is currently 65% to 75% of GDP,” reads the statement.
The stock of OFR has grown over the years to reach $563 billion or about 106% of Singapore’s GDP as at end-2021.
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“This reflects the persistently strong appreciation pressures on the S$NEER arising from Singapore’s positive net savings and large capital inflows from abroad,” says MAS.
Following the transfer, the stock of OFR remaining on MAS’s balance sheet is estimated to be around 95% of Singapore’s GDP.
MAS says it expects to transfer more OFR to the government over the course of the year to bring the OFR to the optimal amount.
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The MAS Act 1970 was amended in February this year to allow the central bank to subscribe to the RMGS.
“This is a new mechanism to facilitate the transfer of OFR that is not needed for the conduct of monetary policy and financial stability from MAS to the government, for longer-term investment by GIC,” says MAS through the statement.
