(Singapore, 8 May 2019) The Monetary Authority of Singapore (MAS) said today that it would be transferring S$45 billion from the official foreign reserves (OFR) to the Government for longer-term investment.

This amount is the excess over what MAS deems necessary to maintain confidence in Singapore’s exchange rate-centered monetary policy.  MAS, as the central bank of Singapore, manages the country’s OFR, which stood at S$404 billion by April 2019.

MAS says it will transfer S$45 billion to the Government for management by GIC Private Ltd, a Singapore government-backed long term investor within this month.

MAS says the stock of OFR has grown steadily over the years. As a proportion of GDP, OFR amounted to 82% as at Q1 2019. MAS periodically assesses the size of OFR that is necessary for supporting the conduct of monetary policy and financial stability.

In its latest review, MAS assessed that it should maintain OFR amounting to at least 65% of GDP on an ongoing basis. This level of OFR will provide a sufficiently strong buffer against stresses in the global economy and markets, and underpin confidence in Singapore’s exchange rate-centered monetary policy. Accordingly, the current level of OFR is in excess of that required by MAS.

MAS says the transfer of assets from MAS to the Government does not imply any reduction in Singapore’s total foreign reserves. In the event of an extreme adverse scenario, the foreign reserves held by the Government are also available to ensure that MAS’ operations are not compromised.

Singapore’s monetary policy is aimed at ensuring medium-term price stability. Given the dominant role that the exchange rate plays in determining core inflation in Singapore, MAS conducts monetary policy by managing the exchange rate of the Singapore Dollar. MAS says it does this through market intervention operations to keep the nominal effective exchange rate of the Singapore Dollar within a policy band consistent with ensuring price stability.