Singapore’s central bank, the Monetary Authority of Singapore (MAS), announced that it incurred its largest net loss of SGD 30.8 billion (USD 22.8 billion) in the 2022-2023 financial year. The loss was primarily attributed to the aggressive tightening of monetary policy implemented by MAS to combat inflation. The bank’s Managing Director, Ravi Menon, stated that this resulted in a “broad appreciation” of the Singapore dollar against other currencies such as the US dollar, euro, and yen.
The significant loss was further exacerbated by negative currency translation effects of about SGD 21.4 billion, accounting for approximately 70% of the annual net loss. This was primarily due to the fact that MAS’s official foreign reserves were held in USD, euro, and yen. However, Menon emphasized that the loss would not affect the government’s ability to spend up to 50% of the expected long-term investment returns generated by MAS, GIC, and Temasek, which are responsible for managing the reserves.
MAS also incurred higher interest expenses of SGD 9 billion as part of its efforts to absorb excess liquidity in the banking system. Despite a small investment gain of SGD 0.6 billion from the official foreign reserves, the weak investment performance, down from SGD 4 billion in the previous year, was attributed to challenging market conditions where both bonds and equities performed poorly.
Menon reassured that the significant loss should not be a cause for concern as it does not impact the external purchasing power of the official foreign reserves or MAS’s ability to conduct monetary policy and support financial stability. He explained that attempts to hedge against negative currency translation effects would be counterproductive, leading to a stronger appreciation of the Singapore dollar and potential harm to the economy.
While MAS’s investment performance is expected to remain weak in the next few years, Menon noted that the central bank’s official foreign reserve position remains healthy, and there is no draw on its past reserves. However, a return to profitability and the ability to contribute to the government’s consolidated fund will take time, as future profits exceeding the cumulative losses of SGD 38.2 billion in the past two financial years need to be generated.
As a precautionary measure to maintain sufficient capital relative to its assets, MAS increased its issued and paid-up capital by SGD 25 billion to SGD 50 billion during the financial year. Menon clarified that the central bank is not shifting from its focus on combating inflation to supporting economic growth and will closely monitor the evolving dynamics of growth and inflation to adjust monetary policy if necessary.
Ravi Menon, an individual of Indian-origin, was re-appointed as the Managing Director of MAS for an additional two years until May 31, 2025, or until his retirement from the Singapore Public Service, whichever comes first. During his 12-year tenure, Menon played a crucial role in guiding Singapore’s economy through the post-global financial crisis period.
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