Jamus Lim on MAS $7.4 billion loss: ‘I see little reason to fault the actions of MAS, or to criticize the losses incurred’
Workers’ Party MP Jamus Lim weighed in on the S$7.4 billion loss recorded by the Monetary Authority of Singapore (MAS) for the final monetary 12 months, saying he noticed no fault with MAS for these losses.
The Sengkang GRC Member of Parliament is an Associate Professor of Economics at ESSEC Business School. He is presently at Stanford University within the United States on a summer time fellowship.
Assoc Prof Lim wrote in an Aug 3 Facebook publish that the losses MAS reported final month “have been largely attributed to ‘translation,’ resulting from the strengthening of the Sing dollar (SGD),” an motion that he helps.
He famous that Finance Minister Lawrence Wong already clarified in Parliament that these losses would have a minimal affect on the federal government’s finances, and added his personal clarification as to why they’re “largely innocuous in other ways.”
One risk is that MAS bought or rolled over some international forex property, which can have decreased in worth because the SGD strengthened. These more than likely can be the pound, yen, and euro, because the Sing greenback has not strengthened a lot towards the US greenback.
He referred to as this loss “hard to avoid” because it’s fascinating for the central financial institution to carry a diversified portfolio of international forex property, including that “some losses that result from these due to currency movements is part and parcel of doing business.”
The second risk he talked about can be losses incurred in direct intervention to assist the SGD.
“This means that financial markets were selling SGD, and MAS went ahead to bolster the currency by buying back SGD (and selling foreign currency reserves to do so). If this was indeed true, I would be willing to issue a mea culpa: I did not expect that it would be costly, given the undervaluation of the SGD by many metrics.”
But this, he added, is unlikely, and posted a money stream assertion from MAS to show his level.
“Recently, conventional reserves have been transferred right into a newly-created asset class, Reserve Management Government Securities.
The RMGS performs an identical function to Special Singapore Government Securities (SSGS), which is to facilitate the switch of property to our sovereign wealth funds for higher funding administration. Based on MAS monetary statements, reported losses seemingly consequence from this conversion, at present alternate and rates of interest.”
He additionally identified that if the losses had been because of MAS’ direct intervention, this could really be to the benefit of Singaporeans.
Moreover, even when we settle for that the losses are really the results of direct intervention, it’s also vital to acknowledge what that is.
“If the MAS had not intervened, then the effect of higher resulting inflation (due to the higher price of imports of goods and financial assets) would have instead been borne by the consumer or borrower. So while the MAS did lose money, it is far from clear that this was an incorrect policy choice, since the country could have benefitted as a whole, from lower inflation.”
He ended his publish by writing that he sees “little reason to fault the actions of MAS here, or to criticize the losses incurred,” and added that the WP, as “loyal opposition… focuses its critique on legitimate concerns, rather than knee-jerk objections to anything the government does.”
Jamus Lim: What the federal government has achieved so far to deal with the issue (inflation) doesn’t appear to be enough for anybody
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