The Monetary Authority of Singapore (MAS) announced on 8 May that it would be transferring SGD 45 billion (USD 33 billion) from the official foreign reserves (OFR) to the Government for management by one of Singapore’s sovereign wealth funds, GIC, so that these funds can be invested on a longer-term basis with expected higher returns.
This amount is the excess over what MAS deems necessary to maintain confidence in Singapore’s exchange rate-centered monetary policy. MAS, as the central bank of Singapore, manages the country’s OFR, which stood at SGD 404 billion (USD 296 billion) as at April 2019. As a proportion of GDP, OFR amounted to 82% as at Q1 2019. In its latest review, MAS assessed that it should maintain OFR amounting to at least 65% of GDP on an ongoing basis. Accordingly, the current level of OFR is in excess of that required by MAS.
GIC is a sovereign wealth fund established by the Government of Singapore in 1981 to manage Singapore’s foreign reserves. The returns from the investment of reserves make a significant contribution to the Singapore government budget, which is facing rising social and healthcare spending in the face of an aging society. Net Investment Returns Contribution (NIRC) which comprises up to 50% of the Net Investment Returns (NIR) on the net assets invested by GIC, MAS and Temasek; and, up to 50% of the Net Investment Income (NII) derived from past reserves from the remaining assets, contributed SGD 16.44 billion (USD 12.1 billion) to Singapore’s 2018 budget and it is expected to account for SGD 17.17 billion (USD 12.6 billion) of the budget in 2019.
(Sources: Monetary Authority of Singapore; Business Times)