MAS accumulates OFR when it intervenes in the foreign exchange market as part of monetary policy implementation, to keep an appreciating Singapore dollar nominal effective exchange rate (S$NEER) within the bounds of MAS’ policy band, through buying foreign currency and selling SGD.

Prior to the introduction of RMGS, OFR transfers to the Government (see Q4 on why MAS transfers OFR to the Government) were facilitated by a reduction of Government deposits (GDs, and monies). GDs are the Government’s SGD cash deposits placed with MAS.

A new transfer mechanism was introduced in 2022 as the accumulation of OFR is expected to outpace the growth of GDs.

• Accumulation of OFR: Structural factors, in the form of the Singapore economy’s positive net savings and persistent capital inflows in recent years amid abundant liquidity in global financial markets and quantitative easing in other economies, can cause the S$NEER to appreciate beyond a level consistent with domestic price stability.

• Smaller fiscal balances: Singapore’s fiscal situation is expected to be tighter as the Government spends more to meet growing social and security needs, e.g., in healthcare, pre-school education, and security. This has resulted in a slower pace of growth in GDs.

The issuance of RMGS allows OFR not needed by MAS to be transferred to the Government for longer-term management by GIC without being constrained by the availability of GDs.

Find out more about RMGS on the MAS website.