The Monetary Authority of Singapore (MAS) recorded its largest net loss of S$30.8 billion (US$22.8 billion) in the financial year that ended Mar 31, widening significantly from a S$7.4 billion loss in the year before that.

This was largely because of the central bank’s aggressive monetary policy tightening to bring down inflation, which paved the way for a “broad appreciation” of the Singapore dollar against other currencies – such as the US dollar, euro and yen – that the official foreign reserves were held in.

As MAS’ financial results are reported in the Sing dollar, it saw “significant” negative currency translation effects of about S$21.4 billion, or 70 per cent of the annual net loss, MAS managing director Ravi Menon said on Wednesday (Jul 5).

MAS also incurred higher interest expenses of S$9 billion as part of mopping up excess liquidity in the banking system, he added at the release of the central bank’s annual report and sustainability report.

These two factors outweighed the “small” investment gain of S$0.6 billion that the MAS made on the country’s official foreign reserves. This weak investment performance, down from S$4 billion in the year before, comes amid a challenging market where both bonds and equities have performed poorly, it said.

Meanwhile, total expenditure ballooned to S$13.7 billion, from S$2.8 billion in the year before, due mainly to “unusually large” interest expenses on MAS bills and other borrowings for domestic money market operations.

Due to the loss, MAS will not contribute to the government’s consolidated fund, nor return profits to the government for the financial year.

Mr Menon said the large annual loss is “not a cause for concern”, adding that the negative currency translation effects do not affect the external purchasing power of the official foreign reserves.

They also do not affect MAS’ ability to conduct monetary policy or support financial stability.

“In fact, in 10 out of the last 15 financial years, MAS recorded negative currency translation effects. Not surprising given that the Singapore dollar has generally been strengthening against other currencies,” he told reporters at a press conference.

However, it “does not make sense” to try to hedge against negative currency translation effects. 

If MAS wanted to do so, it would have to sell US dollars from the official foreign reserves to buy Sing dollars, said Mr Menon. This will negate other interventions by the MAS in the foreign exchange market and will cause the Sing dollar to appreciate much more, thereby harming the economy and depleting the official foreign reserves, he explained.

The loss also does not result in a draw on MAS’ past reserves, with the official foreign reserve position remaining “very healthy”.

That said, MAS’ investment performance is likely to stay weak in the next two to three years amid a challenging macroeconomic and financial market environment, said Mr Menon.

This means that a return to profitability, and in turn the ability to contribute to the government’s consolidated fund, “will take time”, he added.

“We will need to generate future profits exceeding the cumulative losses in the latest two financial years of S$38.2 billion before we can resume contributions to the consolidated fund.”

But Mr Menon stressed that this will not affect the government’s ability to spend up to 50 per cent of the expected long-term investment returns generated by MAS, GIC and Temasek – the three entities tasked to manage the reserves.

Meanwhile, as a “conservative measure” to ensure it remains well‐capitalised relative to its assets, MAS said it increased its issued and paid‐up capital by S$25 billion to S$50 billion in the financial year. 

As of Mar 31, the total capital and reserves of MAS was at S$34.3 billion.


On the outlook for the Singapore economy, MAS assesses that growth will remain weak in the near term.

Key growth engines, such as manufacturing and financial services, are expected to “remain in the doldrums” amid the weak external outlook, said Mr Menon.

At the same time, growth in the domestic-facing sectors will taper as consumer demand slows on the back of higher interest rates and more moderate wage increases. 

As a result, economic growth is set to slow to a “below-trend” pace within the current forecast range of 0.5 to 2.5 per cent.

Mr Menon noted that inflation in Singapore has “clearly peaked and … discernibly moderated”. 

With a “benign” outlook for consumer prices ahead, the central bank is lowering its forecast for headline or all-items inflation for 2023 to a range of 4.5 to 5.5 per cent, from the previous 5.5 to 6.5 per cent. 

The forecast for core inflation remains unchanged at 3.5 to 4.5 per cent.

But the fight against inflation “is not over”, said Mr Menon, adding that the central bank is “not switching from inflation-fighting mode to growth supporting mode”. 

“We are closely monitoring the evolving growth (and) inflation dynamics and remain vigilant to risks on either side, and we stand ready to adjust monetary policy as needed, especially if inflation momentum were to be accelerated,” he said.


Separately, the MAS said it has allocated 2 per cent of its portfolio, or slightly over S$8 billion, to a climate transition programme.

The climate transition programme aims to mitigate the adverse impact of climate change, in particular transition risk on the central bank’s reserves portfolio.

It has done so by tilting part of its equities portfolio to fewer companies that are less carbon-intensive and more aligned with the low-carbon transition, rather than excluding the entire carbon-intensive sector, said Mr Menon.

This approach strikes a balance between reducing the carbon intensity of MAS’ portfolio and continuing to support companies in transition, he added.

In selecting the climate indices to tilt its equities portfolio, MAS said it considered both off-the-shelf and bespoke solutions. 

Off-the-shelf climate indices have more established track records, whereas bespoke climate indices can be tailored to better suit MAS’ requirements, it said in its annual sustainability report. 

It added that it is piloting both types of solutions and will monitor them over time. 

“Our approach to climate portfolio actions is to start small, learn fast, and scale up as new data provide greater clarity,” Mr Menon said. 

“We will scale up our climate transition program as we gain confidence in the effectiveness of the climate indices we have used to tilt our equities portfolio.”

Source: CNA