On 15 November 2024, Bank Negara Malaysia (“BNM”) announced an important liberalisation of Malaysian’s foreign exchange control rules for Multilateral Development Banks (“MDBs”) and Qualified Non-resident Development Financial Institutions (“DFIs”). MDBs are financial institutions whose membership consists of sovereign states while DFIs are financial institutions established (usually by governments) to support the development of a nation.


The liberalisation allows MDBs and DFIs to:

  • issue ringgit-denominated debt securities for use in Malaysia; and
  • provide ringgit financing to resident entities in Malaysia.


Both MDBs and DFIs generally have a mandate to finance development projects, support investments and generate capital, with the aim of encouraging economic and social development.


Amendments to BNM’s Foreign Exchange Notices


BNM’s Foreign Exchange Notice Nos. 2 and 5 have been amended to facilitate the foreign exchange control liberalisations. 


Paragraph 8 of FX Notice 2 (Borrowing, Lending and Guarantees)

A Resident Entity is allowed to borrow in Ringgit for use in Malaysia … in any amount from a Multilateral Development Bank or a Qualified Development Financial Institution. 


New Paragraph 15 of FX Notice 2

A Multilateral Development Bank or Qualified Development Financial Institution is allowed to borrow in Ringgit in any amount for use in Malaysia, from a Resident and Non-resident, through the issuance of a debt security denominated in Ringgit.


New Paragraph 2 of FX Notice 5

A Multilateral Development Bank or Qualified Development Financial Institution is allowed to issue a debt security denominated in Ringgit in Malaysia to any person subject to compliance with Notice 2. 


The amendments are aimed at facilitating MDBs and DFIs investments in key growth areas in Malaysia.


Impact of Foreign Exchange Control Liberalisations


BNM has traditionally regulated the Ringgit debt markets by limiting the ability to lend in Ringgit primarily to 50+ licensed onshore banks, investment banks and development financial institutions in Malaysia.


With the easing of the foreign exchange rules, international MDBs and Qualified DFIs can now borrow in Ringgit by issuing Ringgit debt securities (both conventional bonds and Islamic sukuks) in any amount. This gives another avenue for MDBs and Qualified DFIs to source for Ringgit liquidity, which may be used by such financing institutions to provide Malaysian customers financing facilities denominated in Ringgit, without BNM’s prior approval.


This liberalisation allows MDBs and Qualified DFIs to tap Malaysia’s robust Ringgit bond and sukuk market to raise Ringgit financing with Malaysia’s Islamic securities market being the largest globally. Additionally, it opens up another avenue of Ringgit financing for Malaysian residents, potentially  benefitting major infrastructure projects in Malaysia through the availability of Ringgit financing from international financiers for domestic projects.


If you have any questions or require any additional information, please contact Loo Tatt King or the partner you usually deal with in Zaid Ibrahim & Co.

This alert is for general information only and is not a substitute for legal advice.