Bank Negara Malaysia (BNM), the Malaysian central bank, has announced the first relaxtion of the foreign exchange controls imposed by the Matahir Mohamed regime in the wake of the Asian Flu epidemic of 1997-98.
Ringgit assets purchased by residents from non-residents may be settled in Malaysian Ringgit (MYR) or in foreign currency, provided that foreign currency is not issued by Israel, Serbia or Montenegro, who are judged to be hostile to Muslims.
However, all remittances abroad must be made in foreign currency (except the currency of Israel, Serbia and Montenegro).If settlement of the Ringgit asset is in a foreign currency, the resident buyer can either effect the payment within Malaysia with a Ringgit equivalent of the foreign currency involved, or effect a remittance abroad made out in the foreign currency. The resident must still report to the BNM the payment purpose for amount exceeding MYR 10,000 by completing “Form P – Payments to Non-Residents”.
Transfers of Ringgit-denominated securities between non-residents may be made in Ringgit (if settled in Malaysia) or in foreign currency (if settled overseas). If non-residents contract amongst themselves to buy or sell unlisted or unquoted Ringgit securities, this transaction can be settled either in Ringgit (within Malaysia) or in foreign currency (offshore).
Citibank says that the amendment effectively ends the requirement to obtain prior approval from the central bank to settle unquoted or unlisted securities in foreign currency. But the bank adds that listed securities will continue to settle in Ringgit only. In accordance to current Kuala Lumpur Stock Exchange (KLSE) regulations, all trades must be traded and contracted in Ringgit and settled on the KLSE only. It remains unclear if the amendments also apply to Malaysian Government Securities, Treasury Bills, and corporate debt securities. Currently, all such trades are settled in Ringgit only.