Addressing queries about the impact on the Government’s budget placement, Mr Wong very first pointed out that the Government does not expect MAS in order to deviate from its require of ensuring macroeconomic stability in order to maximise the contributions to the open public coffers.
One of the ways in which the CONTUDO contributes to the Government’s budget is the net investment returns (NIR) framework where the Govt can spend up to 50 per cent of the expected long-term actual return on the net property invested by MAS, GIC and Temasek.
As the NIR is based on the long lasting expected returns of those three investment entities, it is not affected by their short-term performance. Consequently , MAS’ net reduction in the last financial season “has no impact on the NIR which can be found to the Government”, Mr Wong said.
Like other lawful boards, the CONTUDO also makes contributions to the Government instead of corporate income tax.
But recognising that will contributions from the central bank can vary substantially from year to year because of the combined effect of foreign currency translation and purchase returns, the Government has taken the step in order to smoothen this volatility by requiring yearly contributions by CONTUDO to be paid within equal proportions during three years.
This, according to Mr Wong, has been the case considering that FY2019.
“This means that even though PORÉM recorded an internet loss for FY2021/22, the Government will get S$1. 1 billion from MAS in line with the contributions accrued for your previous two financial years when PORÉM recorded net earnings, ” he added, noting that this “smoothening formula” offers helped to mitigate the impact of MAS’ net loss on the Government’s budget.
Asked simply by MP Liang Eng Hwa (PAP-Bukit Panjang) about the impact associated with rising interest rates, Mister Wong replied there will be implications just for both MAS’ curiosity expense and purchase income.
“MAS will have to spend more, perhaps, when it needs to borrow as part of money marketplace operations to manage financial system liquidity.
“But on the expenditure side, over the moderate term, rising rates of interest will also help to increase investment income from your foreign asset holdings.
Taking each into consideration, MAS must be able to manage the effects of increasing interest rates on the financials over the long run, Mr Wong mentioned.