Singapore’s central bank, the Monetary Authority of Singapore (MAS), posted a net loss of S$7.4 billion ($5.3 billion) for the 2021-2022 financial year that ended on March 31.
In his
speech at a press conference on July 19, the MAS’s Managing Director Ravi Menon noted that the loss arose mainly from lower investment gains (S$4 billion) and a large negative foreign exchange translation effect (-S$8.7 billion), as well as higher interest expenses (-S$2.8 billion).
The Singapore dollar strengthened 4 percent against the pound, 5 percent against the euro, and 9 percent against the yen.
The last annual net loss posted by the MAS was
nine years ago during the 2012-2013 financial year, when it recorded a S$10.6 billion loss. During that period, the Singapore dollar had appreciated 13.8 percent against the yen, 6.2 percent against the pound, 5.1 percent against the euro, and 1.3 percent against the U.S. dollar.
The MAS is one of the
three entities tasked with managing the reserves of Singapore, and oversees the Official Foreign Reserves (OFR) of Singapore, which amounted to $380 billion as of March 31. The MAS is the most conservative of the three entities, with a “significant proportion of its portfolio invested in liquid financial market instruments,” according to Singapore’s Ministry of Finance.
The other two entities are Temasek Holdings, which invests in equities and had a net portfolio value of
$297 billion, and GIC Private Limited, which does not disclose the amount of assets it manages, except stating that it manages “well over” $100 billion. Research firm Global SWF
estimates GIC’s assets at $799 billion—the sixth-biggest sovereign investor in the world.
The losses by the MAS were relatively small compared to the assets it manages, said Global SWF founder Diego Lopez,
according to AsianInvestor.
“Unlike Temasek, which has the benefit of having an illiquid portfolio, MAS is very much affected by interest rates and the stock markets, which are not faring well at the moment,” he said.
Managing Currency Central to Combating Inflation
Some central banks manage interest rates to reach their inflation objectives, but Singapore’s central bank
focuses on managing the exchange rate of its currency.
In his speech, Menon noted the MAS had tightened monetary policy four times in the last nine months, starting from October last year, by allowing the Singapore dollar to appreciate.
Usually, such policy decisions were made twice a year, in April and in October. But this year, two more off-cycle moves were made,
one on Jan. 25 and another on July 14. These moves were made to proactively dampen inflation, he said.
“A stronger exchange rate helps to directly reduce imported inflation as well as restrain export demand, providing relief to labour market pressures.”
Singapore’s headline inflation was 5.6 percent year-on-year in May. Core inflation, which excluded accommodation and private transport, increased to 3.6 percent year-on-year in May, up from 3.3 percent in April and 2.5 percent over the first quarter of the year. The historic average since 2000 was 1.5 percent.
Menon said the effects of the four policy moves “are still working their way through the economy” and expected inflation to be reduced over the next 12 months. Core inflation for 2022 was forecasted at 3-4 percent.
Growth in Singapore’s economy had slowed over the year, but he said Singapore was still on track to hit the lower half of its 3-5 percent GDP growth forecast.
