Transfer of excess reserves to GIC: It's not about tax cuts, but maximising returns

EVERYONE loves a tax hike delay, even more so an outright tax cut.

So it was not a surprise that when the Monetary of Singapore (MAS) announced it was transferring S$45 billion from its reserves to GIC for the latter to manage, a couple of economists - presumably income-earning taxpayers - ventured to speculate that the move signalled potential cuts in taxes, and possibly a delay in the unpopular goods and services (GST) tax hike.

MAS had explained the rationale for the transfer. Based on its assessment, official foreign reserves (OFR) amounting to at least 65 per cent of gross domestic product (GDP) should be adequate for its monetary policy and to maintain financial stability. This meant the S$404 billion in OFR that it is managing is in excess of what it deems necessary since it currently stands at 82 per cent of GDP.