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Monetary Policy The MAS was set up in 1971 to oversee various monetary functions associated with banking as well

as finance. Before its establishment, monetary functions were performed by government departments and agencies. As Singapore progressed, the demands of an increasingly complex banking and monetary environment necessitated streamlining the functions to facilitate the development of a more dynamic and coherent policy on monetary matters. Therefore in 1970, the Parliament of Singapore passed the Monetary Authority of Singapore Act leading to the formation of MAS on 1 January 1971. The act gives MAS the authority to regulate all elements of monetary, banking and financial aspects of Singapore. In April 1977, the Government decided to bring the regulation of the insurance industry under the wing of the MAS and in September 1984 the regulatory functions under the Securities Industry Act (1973) were also transferred to MAS. This means that unlike many other central banks, MAS is also the financial regulatory authority for Singapore. The MAS has been given powers to act as a banker to and financial agent of the Government. It has also been entrusted to promote monetary stability, and credit and exchange policies conducive to the growth of the economy.However, unlike many other central banks such as Federal Reserve System or Bank of England, MAS does not regulate the monetary system via interest rates to influence the liquidity in the system. Instead, it chooses to do it via the foreign exchange mechanism. It does so by intervening in the SGD market. Monetary Authority of Singapore (MAS) is the central bank of Singapore. It formulates and executes Singapore's monetary policy, and issues Singapore currency. As banker and financial agent to the Government, MAS manages the country's official foreign reserves and issues government securities. As supervisor and regulator of Singapore's financial services sector, MAS has prudential oversight over the banking, securities, futures and insurance industries. It is also responsible for the development and promotion of Singapore as an international financial centre. MAS' Mission To promote sustained non-inflationary economic growth, and a sound and progressive financial centre.

They produce a range of publications. developments or practices in the financial sector. to share with market participants. The FSR aims to contribute to a greater understanding and exchange of views among market participants. insurance. Asia-Studies carries the full-text of the following MAS publication series:      The Financial Stability Review (FSR) analyses the risks and vulnerabilities arising from developments in Singapore and the global economy and assesses their implications for the soundness and stability of the financial system. The MAS Survey of Professional Forecasters provides a summary of forecasts of Singapore's key economic indicators by economists and analysts. securities and futures industries. and in doing so. analysts and the public on issues affecting Singapore's financial system. and the wider public the basis for the policy decision articulated in the MPS. and To build a cohesive and integrated organisation of excellence. and to manage the official foreign reserves and the issuance of government securities. The survey is conducted quarterly following the release of economic data for the previous quarter by the Ministry of Trade and Industry. from daily market commentary to consumer advice to scholarly research. . MAS Information Papers highlight key trends. and develop strategies in partnership with the private sector to promote Singapore as an international financial centre. The opinions expressed in the paper are those of the author(s) and not of the MAS.MAS' Objectives    To conduct monetary policy and issue currency. analysts. The purpose of the Review is to provide information on the Economic Policy Department's background analysis and assessment of GDP growth and inflation developments in the Singapore economy. MAS Staff Papers analyse issues of current interest. The Macroeconomic Review is published twice a year in conjunction with the release of the MAS Monetary Policy Statement (MPS). MAS Publications To support its mission to set economic policy for Singapore. To supervise the banking. the Monetary Authority has an extensive research program employing experts and scholars to study Singapore and the region. the objective is to help disseminate information and enhance understanding of current issues. The papers are not prescriptive in nature.

This trade-weighted exchange rate is maintained broadly within an undisclosed target band. thereby ensuring low inflation for sustained economic growth over the medium term. viz. foreign exchange and money market operations. The MAS publishes a semiannual Monetary Policy Statement (MPS) in April and October which explains its assessment of Singapore's economic and inflationary conditions and outlook. As such. and is allowed to appreciate or depreciate depending on factors such as the level of world inflation and domestic price pressures. are discussed in MAS' monograph on Monetary Policy Operations in Singapore . The key aspects of MAS' monetary policy operations. and the various factors and considerations underlying them. In the context of Singapore's open capital account. and sets out its monetary policy stance for the following six months. Monetary policy is reviewed on a semi-annual basis to ensure that it is consistent with economic fundamentals and market conditions. the choice of the exchange rate as the focus of monetary policy would necessarily imply that domestic interest rates and money supply are endogenous. Monographs The MAS manages the Singapore dollar (S$) exchange rate against a tradeweighted basket of currencies of Singapore's major trading partners and competitors. MAS' money market operations are conducted mainly to ensure that sufficient liquidity is present in the banking system to meet banks' demand for reserve and settlement balances. Singapore's exchange rate-based monetary policy system and its experience since its adoption are reviewed in MAS' monograph on Singapore's Exchange Rate Policy. MAS may also intervene in the foreign exchange market to prevent excessive fluctuations in the S$ exchange rate. The composition of this basket is reviewed and revised periodically to take into account changes in Singapore's trade patterns.

With a broad-based GST. This is evidenced by the fact that development expenditure accounted for around one-third of government expenditure on average over the last three decades. The Government is also committed to building and maintaining world-class economic infrastructure and services.[2] The government also argued that with an ageing population. not income. A tax on consumption. On the recommendation of the 1986 Economic Committee. Singapore’s income tax base was expected to decline.[3] A value-added tax. health care and national security. Therefore. also has several features that make it attractive. the taxation burden would be more evenly spread among the population. Singapore's corporate income tax rate and top marginal personal income tax rate both stood at 40%. and to sustain its economic growth in order to create well-paying jobs for Singaporeans The GST was part of a larger tax restructuring exercise to enable Singapore to shift its reliance from direct taxes to indirect taxes. Such high rates were deemed to be uncompetitive. in order to sustain long-term growth and job creation. key areas of expenditure are on education. public housing. unlike a retail sales tax system or an income tax system. The Government spends to assure the nation of a secure future. The government argued that tax reform was necessary in order to maintain Singapore's competitiveness. which would be relatively easier to evade The main focus of the Government's expenditure is on the delivery of essential public goods and services to Singaporean.Fiscal Policy Before 1986. the tax system inherently encourages savings and investments instead of consumption. The tax also has a self-policing mechanism that discourages evasion. Singapore's government decided that it needed to shift from direct to indirect taxes. . in order to maintain its international competitiveness in attracting investments. like the GST.

. As Singapore’s fiscal policy is directed primarily at promoting long-term economic growth. i. incentives for saving. Against the backdrop of such a prudent fiscal policy.Singapore's tax policies. tax and expenditure policies should be justified on microeconomic grounds and focus on supply-side issues. High domestic savings have further. rather than cyclical adjustment or distributing income. although providing the main source of funding for the government. and the government's role is to provide a stable and conducive environment for the private sector to thrive. which has served to boost investor confidence and provide a buffer against adverse economic shocks. due to high import leakages. the Singapore Government has adopted the following principles in its conduct to meet its objective:    the private sector is the engine of growth. Singapore was able to enjoy consistent budget surpluses over the years. which complemented the monetary policy in promoting sustained and non-inflationary economic growth. provided Singapore a high level of foreign reserves. the counter-cyclical role of fiscal policy is limited. investment and enterprise. in turn.e. which contributed to a high savings rate that allows it to achieve one of the highest investment rates in the world without having to incur foreign debt. This combination of fair tax policies and prudent expenditure programmes are key reasons for Singapore’s successful fiscal policy over the years. seek to enhance its economic competitiveness and attract foreign investments to Singapore.

which extends throughout the public sector. the MAS has been able to focus on its primary goal of ensuring price stability and preserving confidence in the domestic currency through the appropriate management of the S$ exchange rate.With this ethos of fiscal rectitude. . without needing to balance this against the requirements of deficit financing.