Liberalisation of Foreign Exchange Policy

Bank Negara Malaysia (BNM) is pleased to announce further liberalisation of foreign exchange policy (FEP) which provides greater flexibilities to businesses as part of our continued efforts to strengthen Malaysia’s position in the global supply chain and to foster a conducive environment in attracting foreign direct investment (FDI) into Malaysia.

The gradual liberalisation process over the recent years has been consistent with Malaysia’s stronger external position and a more resilient financial market. Therefore, these measures will provide greater flexibilities to the export-oriented industries to better support the economic recovery.

1. Removal of export conversion rule
   
   Resident exporters may now manage the conversion of export proceeds according to their foreign currency cash flow needs.
    
2. Resident exporters can settle domestic trade in foreign currency with other residents involved in the global supply chain^[1]
   
   Recognising Malaysian exporters’ vital position in the global supply chain, this measure will facilitate natural hedge for resident exporters and their business partners along the supply chain to better manage the foreign exchange risk.
    
3. Resident exporters can extend the period for repatriation of export proceeds beyond six months under exceptional circumstances^[2]
   
   While the 6-month rule remains in place, this flexibility eliminates the need for exporters to seek BNM’s approval in repatriating their export proceeds beyond the 6-month period for reasons beyond the exporters’ control. For other purposes, approval from BNM is still required.
    
4. Resident exporters can net-off export proceeds against permitted foreign currency obligations^[3]
   
   With this flexibility, exporters no longer need to seek approval from BNM for netting arrangements involving export proceeds. This would enhance business efficiency and cash flow management for exporters.
    
5. Resident corporates can undertake commodity derivatives hedging directly with non-resident counterparties
   
   In addition to the current access to resident futures brokers for their commodity hedging needs, resident corporates are allowed to transact commodity derivatives with non-resident futures brokers directly. This provides greater risk management avenue and choice for resident corporates to hedge their commodity price risk.

The above measures are effective 15 April 2021. Further details of the measures will be provided in the revised Foreign Exchange Notices^[4] issued by BNM on the same date.

See also: Frequently Asked Questions (FAQ)
 

Bank Negara Malaysia
31 March 2021

^[1] Global supply chain is defined as a business activity where resident importers purchase goods or services from overseas to support production and distribution of goods or services by resident exporters for their export activities. This includes domestic trade transactions between the resident importer and the resident exporter undertaken through resident intermediaries.

^[2] Exceptional circumstances are defined as a situation where exporters have no control over the delay in receiving the export proceeds e.g. their buyers are in financial difficulties (see FAQs for more details)

^[3] Such as netting of export receivables against import payables with the same overseas buyer and supplier (see FAQs for more details).

^[4] Refer to BNM’s website at https://bnm.my/fep.