Unearthing the 25-year-old forex scandal

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KINIGUIDE Sometimes, just when you thought the world has moved on, an old ghoul rises from its grave to haunt you for your past mistakes.

That is now the prospect faced by those put in charge of Malaysia’s economy in the early 1990s.

Although the events took place about 25 years ago, the government has now set up a task force to investigate Bank Negara’s foreign exchange transactions at the time.

What happened back then?

Between 1989 and 1993, Bank Negara was engaging in some foreign exchange market (forex) transactions. A 1991 Reuters report even quoted dealers claiming that the central bank was one of the top players in forex.

However, the details of Bank Negara’s dealings remain unclear to this day, and there has been no investigation of the matter to date – at least not one in public knowledge.

What is clear is that Bank Negara lost a lot of money in the transactions. The loss was initially reported as being RM9.3 billion, which was the fall in the central bank’s reserves.

The sum is now believed to be closer to RM31.3 billion, or about US$10 billion at the exchange rate at the time.

The then Bank Negara governor, Jaafar Hussein, and his deputy Nor Mohamed Yakcop resigned in the fallout of the scandal...