Managing Money Matters

Bloomberg screamed "Singapore Central Bank Posts Record Loss" - the Monetary Authority of Singapore has posted a record loss of S$10.9 billion ($9 billion) in the year through March. "We made good investment gains but when measured in the Singapore dollar, these gains were more than offset by the strength of the currency,” was the way Managing Director Ravi Menon explained the second loss in the central bank’s 40-year history. A net loss of S$9.2 billion was reported in the year through March 2009.

MAS uses the exchange rate instead of interest rates to control monetary policy, and "finance our imports from the rest of the world and safeguard the value of our currency". Further appreciation is expected in April to tame price gains again, the third monetary policy tightening in a year. With each intervention in the open market to boost the Singapore dollar, which sources say is a daily event, the central bank’s equity investments in U.S. dollar terms will be further eroded by each exercise. Make that our hard earned savings are diminished by each masochistic exercise.

Whatever imported inflation MAS is targeting at seems to provide no visible relief to the common man. The same MAS is revising it's inflation forecast from 3~4 percent upwards to 4~5 percent, blaming "global inflationary prices". Isn't the strong Singapore dollar, which has appreciated 11 percent in the year through March, supposed to address these factors? The hard reality is that a strong currency is useless when the major bugbears are accommodation and transport costs, in particular the local inventions like COV (cash-over-valuation) and COE charges. If the price of oil imports is neutered at all by the currency moves, it sure as hell is not passed down to the layman in his electricity and transportation bills.

Menon claims from his ivory tower, "A strong Singapore dollar has helped, not just by filtering oil and food price increases, but also by providing a restraining effect on the economy." All we see at ground level is bus and train companies using oil price as excuse to seek a record 2.8 percent hike, and a S$10.9 billion gaping hole in the MAS report card. Somebody has some serious explaining to do. Apologies not accepted.