The Central Bank of Singapore, known as the Monetary Authority of Singapore (MAS), today announced that it has transferred excess foreign reserves of US$ 55 billion to the Government – or, effectively, to the Sovereign Wealth Fund, GIC. The latter now manages assets in excess of US$ 799 billion, according to estimates by Global SWF.

As highlighted last week, Singapore operates three main pools of capital: MAS (the Central Bank), GIC (the Sovereign Fund) and Temasek (the Investment Company). The three institutions manage over US$ 1.6 trillion that comes from various sources: (i) budget surpluses derived from taxes and other revenues; (ii) proceeds from some domestic bonds called SSGS, which are subscribed by the pension fund CPF; (iii) other government securities; and (iv) land sales.

All that wealth is funneled into the Central Bank, which has it invested it in official foreign reserves (including SDRs, IMF, gold and forex) or transferred to the other two entities, as instructed by the Minister of Finance. At the end of 2021, the OFR account had reached 106% of GDP, and the Government considered it was a waste of resources over the safe threshold of 75%. The difference was estimated at US$ 137 billion, of which US$ 55 billion has just been transferred to GIC. It is unclear when the rest will be passed on.

The transfer was done via a new security called Reserves Management Government Securities (RMGS). It is easy to get lost in all the technical terminology, but the important thing to remember is that the three vehicles are responsible for managing Singapore Inc.’s wealth, and for paying annual dividends (or the so-called NIRC) back to the Government. The Singaporean citizenry does not get a dividend per se (like Alaskans do), but benefits from CPF pension distributions and from lower income taxes (capped at 22%).

With the new capital injection, Global SWF estimates that GIC now manages about US$ 799 billion, passing US federal fund Thrift Savings Plan and South Korea’s NPS to become the world’s sixth largest Sovereign Investor (and fifth largest SWF). We will revise this figure again in July, when we expect GIC to issue the annual report for the fiscal year ending on March 31.

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