THE Monetary Authority of Singapore (MAS) on Wednesday (Jul 5) posted a net loss of S$30.8 billion for the financial year ended Mar 31, 2023, the largest loss it has ever recorded.

This was largely due to the effects of monetary policy tightening to bring down inflation.

“MAS is not switching from inflation-fighting mode to growth-supporting mode,” said Ravi Menon, managing director of MAS.

“We are closely monitoring the evolving growth inflation dynamics… and we stand ready to adjust monetary policy as needed, especially if inflation momentum were to really accelerate,” he added.

At present, MAS has assessed the prevailing monetary policy stance to be sufficiently tight and appropriate for securing medium-term price stability.

MAS’ loss for FY2023 was largely due to the strengthening of the Singapore dollar, exacerbated by weak investment gains as both bond and equity markets performed poorly.

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The stronger Singapore dollar led to a negative currency translation effect and higher interest expenses on domestic money market operations.

The negative currency translation effect amounted to S$21.4 billion in FY2023. This made up close to 70 per cent of MAS’ net loss this year.

Menon, however, said that the negative currency translation effect should not be a cause for concern for MAS.

That is because Singapore’s monetary policies are centred upon managing the rate of the single exchange rate of the Singapore dollar against a trade weighted basket of currencies.

Whenever the Singapore dollar weakens against the foreign currencies that maintain MAS’ official foreign reserves (OFR) – which are used to moderate the appreciation of the Singapore dollar – the central bank experiences a positive currency translation effect. The reverse happens when the Singapore dollar appreciates.

In FY2023, the trade weighted exchange rate of the Singapore dollar strengthened by 6.5 per cent – the highest rate of appreciation in the last decade.

Given that the OFR is meant to be used in foreign currency to support the Singapore dollar in times of currency weakness or to provide funding to the banking system in times of financial stress, a negative currency translation effect thus does not affect MAS’ ability to carry out its functions, Menon said.

Meanwhile, MAS’ investment gains stood at S$600 million.

The central bank also incurred a total expenditure of S$13.7 billion in FY2023, largely due to interest expenses on MAS bills and other borrowings for domestic money market operations.

As Singapore dollar interest rates rose together with the increase in global interest rates, MAS incurred higher interest expense in its conduct of money market operations.

This is the second year MAS has recorded a net loss, following a net loss of S$7.4 billion recorded in FY2022.

This year, it similarly did not make a contribution to Singapore’s Consolidated Fund, nor return profits to the government.

MAS also raised its issued and paid-up capital by S$25 billion to S$50 billion, as a conservative measure to ensure it remained well-capitalised relative to its assets.

As at Mar 31, MAS’ total capital and reserves was $34.3 billion.

On the topic of succession, Menon said he would serve for two years or till he retires from public service, whichever is earlier. “I’ll keep you guessing,” he said, adding that there is a succession plan in place.

This comes after Bloomberg reported in April that Menon was poised to leave the central bank this year. Chia Der Jiun, one of his former deputies, was tipped to be his successor, said people familiar with the matter. Chia is currently the Ministry of Manpower’s permanent secretary for development.

In response, the Public Service Division later gave a statement saying it had “no information to provide at the moment”, when asked about the report that Menon was set to leave MAS.