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Factually – > Reserves
Published Date: 31 August, 2012
Published Date: 04 October, 2012
1. Which entities manage the nation’s reserves?
Our reserves are managed by three agencies – the Government of Singapore Investment Corporation (GIC), Temasek Holdings (Temasek) and the Monetary Authority of Singapore (MAS). The Government’s assets, other than its deposits with MAS and its stake in Temasek, are mainly managed by the GIC. The MAS which is a statutory board, manages its own assets. Temasek, which is wholly owned by the Government, also manages its own assets.
1) The Monetary Authority of Singapore (MAS) – As at 31 Mar 2012, the Official Foreign Reserves (OFR) managed by MAS stands at S$305 billion. MAS’s management of the OFR is in line with Singapore’s monetary policy, which is centred on the management of the exchange rate. The primary objective of our monetary policy is to promote medium term price stability for sustainable economic growth. MAS, as the central bank, also holds around S$150 billion in government deposits as at 31 Mar 2012.
2) Temasek Holdings – Temasek was incorporated in 1974 as an independently managed commercial investment company. As at 31 Mar 2012, Temasek’s assets under management (AUM) are S$198 billion.
3) Government of Singapore Investment Corporation (GIC) – GIC is the Singapore Government’s fund manager and manages over US$100 billion. So far, the Government has not revealed the full size of the assets managed by GIC (this is discussed in item 3).
3. Why do we not reveal GIC’s assets?
Unlike MAS and Temasek which publish the value of their assets, the Government does not publish the size of its assets managed by GIC. Revealing GIC’s assets too will amount to publishing the full size of Singapore’s financial reserves.
It is not in our national interest to publish the full size of our reserves. If we do so, it will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability. Moreover, our reserves are a strategic asset, and a key defence in times of crisis, and it will be unwise to reveal the full and exact resources at our disposal.
However this does not mean that GIC is unaccountable, or that there are no checks in place. (See item 4.)
6. Some online postings attempt to estimate the size of GIC by using data on budget surpluses and issuance of Government securities to estimate fund flows into GIC over the years. When their estimate of GIC’s size exceeds other market estimates, they conclude that funds have therefore gone missing. Where do they go wrong?
Our reserves cannot ‘go missing’ (see item 4).
Some of the confusion created by these recent “estimates” of GIC’s assets arises from the following errors:
First, they assume that all the Government’s available funds are flowed to GIC alone. The Government has significant deposits placed in MAS. As of 31 March 2012, the Government has $147 billion deposited with MAS, compared to MAS’ Official Foreign Reserves (OFR) valued at S$305 billion. MAS has a significant proportion of its portfolio invested in liquid financial market instruments and hence earns a lower rate of return than GIC.
Second, debt servicing costs are sometimes ignored in these estimates. This results in an over-estimate of the assets accumulated through investing the proceeds from the issuance of Government securities, especially over long periods of time. For more information on the Government’s debt position, please refer to the MOF website [http://app.mof.gov.sg/sg_borrowings.aspx].
Third, they overestimate the funds flow into GIC by including the interest and dividend income that the Government gets on its investments. These estimates incorrectly assume the full amount of government budget surpluses as fresh fund injections, without first removing the interest and dividend income portion.