In this section we provide an explanation of the flow of funds that leads to the accumulation of Official Foreign Reserves (OFR), as well as the periodic transfer of excess OFR from MAS to Government.
On 11 January 2022, Parliament passed the MAS (Amendment) Bill which enables MAS to subscribe for Reserves Management Government Securities (RMGS) issued by the Government. In exchange, MAS will transfer to the Government OFR that are in excess of what MAS needs to conduct monetary policy and ensure financial stability (henceforth referred to as “excess OFR” for short).
The amendment to the MAS Act does not change in any way how MAS accumulates OFR. Neither does it change the principles on which excess OFR is transferred from MAS to the Government, nor create new domestic money supply in the process. This section explains these matters and clarifies certain misconceptions.
What are the sources of OFR accumulation?
How are reserves transferred from MAS to Government?
Does RMGS lead to new domestic money creation or central or central bank financing of the Government budget?
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