Control Over MAS on Choice of Monetary Regime or Total Level of Reserves Held

Assoc Prof Jamus Jerome Lim asked the Prime Minister what is the scope of guidance or control on the choice of monetary regime or on the total level of reserves held, that the Government is able to convey to or exercise on MAS as an independent central bank.

Sir, the Monetary Authority of Singapore (MAS) Act states that MAS is to maintain price stability conducive to sustainable growth of the economy and that it is to conduct monetary policy for this purpose. Within this stated mandate, MAS has full autonomy over the appropriate choice of monetary policy instrument and the formulation of monetary policy.

We have addressed questions on the Official Foreign Reserves (OFRs) in this House several times, most recently during the Second Reading Speech on the MAS (Amendment) Bill on 11 January 2022. These covered the purpose of maintaining OFR, how it is accumulated, how it is invested and how much of it is needed. MAS assesses how much OFR is needed for the purpose of implementing its monetary policy, taking reference from internationally accepted measures of reserve adequacy as well as the highly open nature of our economy and financial markets.

I thank the Minister of State for his response. I am just wondering if I could just clarify. So, my interpretation of what was just shared is that MAS actually does maintain quite a bit of discretion in how it operationalises the various scopes, but that the Government is able to make broad suggestions on just how it goes about operationalising these principles. And if that is the case, would the Minister of State be able to share if this is also the general principle that the Government adheres to for all other independent bodies, such as the Chief Valuer?

Sir, I will focus my answer on the MAS. And the structure of the MAS and, indeed, how MAS conducts its exchange rate monetary policy is not new. In fact, it has been something that is a long-stated policy of the MAS. Many advanced countries have opted for statutory central bank independence, but this has not really fully insulated monetary policy from political interference.

The MAS' model is different – MAS may not have statutory independence in the way that many central banks do. It is not independent of the Government, but it is independent within the Government. Let me elaborate.

MAS operates with considerable autonomy, with no interference from the rest of the Government, be it in the conduct of monetary policy or supervisory policy. Yet, MAS is part of the broader Singapore Public Service, working closely with other Government agencies for the national benefit. And macro-prudential policies are successful in Singapore only because the MAS, the Ministry of Finance and Ministry of National Development coordinate and use their respective policy tools in a concerted manner.

If we take a step back and look at over five decades of MAS' history – MAS has built its credibility as a central bank, as a financial supervisor as well as a partner with industry, by learning from the best. Particularly in MAS' earlier years, but also where appropriate, doing things in our own way.

So, we do things in our own because our circumstances are very different from many other jurisdictions around the world. We play an outsized role in global financial markets, for example, as a financial centre; and we are also a very small place but a very open economy. And that is why the way that we do things are different. MAS maintains that operational autonomy from Government.