Bank Negara Malaysia (“BNM”) announced on 15 November 2024 that Malaysia’s Foreign Exchange Policy (“FEP”) will be liberalised to allow Multilateral Development Banks¹ (individually “MDB” and collectively “MDBs”) and Qualified Non-Resident Development Financial Institutions² (individually “Qualified DFI” and collectively “Qualified DFIs”) to undertake the following: 

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

The foregoing liberalisation is effected by introducing the following amendments to the relevant FEP Notices: 

1.	Notice 5 (Securities and Financial Instruments) – by introducing a new paragraph 2 to allow a MDB or QDFI to issue a debt security denominated in Ringgit to any person subject to compliance with Notice 2; and
2.	Notice 2 (Borrowing, Lending and Guarantee) – by introducing:

a)	a new paragraph 8(b) to allow a Resident Entity to borrow any amount in Ringgit for use in Malaysia from a MDB or QDFI; and
b)	a new paragraph 15 to allow a MDB or QDFI to borrow any amount in Ringgit for use in Malaysia, from a Resident and Non-resident, through the issue of a debt security denominated in Ringgit.

According to the media release issued by BNM on 15 November 2024, this liberalisation will, among others: 

1.	facilitate investment in key growth areas in Malaysia, including the electrical and electronics (E&E) industry, technology adoption, sustainability and data centres;
2.	allow financiers and businesses to structure financing in Ringgit for domestic projects while reducing the risk of currency mismatch;
3.	better facilitate greater participation from global investors in key growth areas in Malaysia; and
4.	enable MDBs and QDFIs to share their technical expertise, particularly in blended finance, that would complement existing domestic players in meeting financing demand to support strategic investments and climate transition efforts in Malaysia.

In an information note issued by BNM: 

1.	MDBs: No application is required from MDBs who can immediately enjoy the flexibilities;
2.	QFDIs: Other interested non-resident DFIs may apply to BNM to be a QDFI. If such DFIs meet the criteria, a one-off approval will be provided by BNM and the DFIs will be included in BNM’s list of QDFIs and thereupon, enjoy the FEP flexibilities.

The information note specifies two criteria for interested DFIs to be a QDFI, namely: 

1.	Good governance and clear development mandate; and
2.	Ringgit funds raised via issuances of Ringgit-denominated debt securities and Ringgit financing provided are used to support real economic activities in Malaysia.

Alert by Sheba Gumis (Partner) of the Corporate Practice of Skrine. 
 

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