MAS transfers S$75b of official foreign reserves to the govt through new RMGS mechanism

THE Monetary Authority of Singapore (MAS) said it has transferred excess official foreign reserves (OFR) of S$75 billion to the government through a subscription of Reserves Management Government Securities (RMGS).

RMGS is a new type of non-marketable security issued by the government solely to facilitate MAS' transfers of excess OFR to the government, for longer-term investment by GIC. The MAS Act 1970 was amended in February to allow MAS to subscribe to RMGS.

After the transfer of S$75 billion of OFR to the government, the stock of OFR remaining on MAS' balance sheet is estimated at around 95 per cent of gross domestic product (GDP), the central bank said on Thursday (Apr 7).

MAS expects further transfers of excess OFR to the government over the course of the year to bring the OFR to the optimal amount of 65 per cent to 75 per cent of GDP.

"The stock of OFR has grown steadily over the years, to reach S$563 billion, or about 106 per cent of GDP, at the end of 2021, well in excess of what MAS requires," the central bank said in a statement.

"This reflects the persistently strong appreciation pressures on the S$NEER arising from Singapore's positive net savings and large capital inflows from abroad."

Transfers of OFR to the government have up till recently been facilitated through a corresponding reduction in the government's Singapore-dollar cash deposits with MAS. This means the reduction of assets on MAS' balance sheet is matched by a reduction of liabilities.

Finance Minister Lawrence Wong had highlighted in Parliament in January that this transfer mechanism is increasingly facing constraints.

"This is mainly because MAS's accumulation of OFR has in recent years persistently outpaced the growth of government's deposits with MAS, which are not growing as quickly due to smaller fiscal balances," he said then.

MAS' outstanding holdings of RMGS will be published on its website from Apr 14, 2022 and updated each month thereafter.