Mechanism for Monetary Authority of Singapore to Quickly Avail Itself of Reserves Managed by GIC

Mr Gerald Giam Yean Song asked the Prime Minister aside from redeeming the Reserves Management Government Securities, what are the other mechanisms in place for MAS to quickly avail itself of the reserves managed by GIC.

The Monetary Authority of Singapore (MAS) holds Official Foreign Reserves (OFR) for the conduct of monetary policy. It has assessed that the amount of OFR needed to ensure confidence in the Singapore dollar in the event of a severe crisis in the global economy and financial markets is between 65% to 75% of gross domestic product (GDP).

MAS’ OFR has been sufficient to manage any impact on the Singapore dollar arising from past crises. These include the Asian Financial Crisis, Dot-com crash, SARS, the Global Financial Crisis, the Eurozone sovereign debt crisis and the COVID-19 pandemic. Separately, the foreign reserves MAS accumulates in excess of its needs have been transferred to the Government for investment by GIC for higher returns. In return, the Government issues Reserves Management Government Securities (RMGS) to MAS.

MAS’ current OFR stands at S$455.5 billion and 70% of GDP, well within the optimal range. Nonetheless, in unlikely tail-risk scenarios where MAS’ OFR buffer might prove insufficient, MAS will be able to redeem its RMGS holdings from the Government in exchange for OFR. Today, MAS’ RMGS holdings amount to S$237.6 billion, or 52% of current OFR. If MAS redeems this, it would bring the level of OFR up to 106% of GDP.

Should a crisis of unprecedented scale emerge that causes MAS’ OFR requirements to exceed what RMGS redemptions can provide, MAS can approach the Government for further support. The Government, as owner of the assets that GIC manages, will then decide how best to meet MAS’ need for additional OFR in a timely manner.