KUALA LUMPUR (Nov 15): Malaysia’s central bank on Friday liberalised foreign exchange rules to make it easier for international financial institutions to issue ringgit-denominated bonds and sukuk in the country.
Under the change, multilateral development banks and non-resident development financial institutions are free to issue ringgit-denominated debt securities in Malaysia, and provide financing to domestic corporates, according to Bank Negara Malaysia (BNM).
“All this while, they needed to seek approval (from BNM) to issue ringgit-denominated debt securities; now, they can just go ahead and do it,” said BNM deputy governor Adnan Zaylani Mohamad Zahid at a press conference in conjunction with release of the latest gross domestic product data.
Easing the red tape will widen the financing opportunities by reducing currency mismatch risk while spurring more issuances, global issuers, and international investors in the domestic market, BNM Governor Datuk Seri Abdul Rasheed Ghaffour said at the same briefing.
The collaboration with foreign financial institutions has also “facilitated knowledge transfer and complemented the blended finance approach in mobilising capital to strategic new growth areas such as climate transition”, he said.
He highlighted the loans by International Finance Corporation, the investment and advisory arm of the World Bank, to Yondr Group for a data centre in Johor and to China’s Shandong Intco for a multi-material plastic recycling plant in Selangor.
Ringgit to remain supported
Meanwhile, Abdul Rasheed said the ringgit remains supported after appreciating 14.9% in the third quarter of 2024.
The rise was mainly driven by the monetary policy shift by the US Federal Reserve, including the cumulative 75-basis-point cut in the US Federal Funds Rate in September and November, he said. The Federal Funds Rate is currently at 4.50%-4.75%.
Putrajaya’s structural reforms and ongoing coordinated efforts by the government and BNM also bolstered investor confidence, Abdul Rasheed said. “Financial market participants also expect further rate cuts moving into 2025,” he added.
The narrowing differential with Malaysia’s interest rates is expected support to the ringgit, he noted.
BNM maintained the overnight policy rate at 3% at the last of six reviews scheduled for this year. The central bank has stood pat on rates since it was last raised in May 2023 by 25 basis points, drawing comfort from steady economic growth and tepid inflation.