The cover-up of BNM’s forex loss
By Salahuddin Hisham, The Mole
In the last column, “Mystery surrounding Bank Negara’s forex loss”, there was one question raised that needed to be answered and clarified: “Were MAS and MISC shares originally registered under BNM?”
The answer is yes.
In the 1991 annual accounts of Malaysian International Shipping Corporation Berhad (MISC) and Malaysian Airlines System Berhad (MAS), the 32 per cent and 42 per cent shares were registered under Bank Negara Malaysia (BNM), respectively.
The shares were purchased under Section 30 and 31 of the Central Bank of Malaysia Act. It was perfectly legal.
So perish any suspicion that the bailout of BNM was done via creative transfer of shares before it was sold off to private sector buyers. Nevertheless, the question remains as to how serious the forex losses were? How was it covered?
Enquirie into BNM’s past annual accounts were unnerving. In 1993, the authorised and paid-up capital of the central bank was only RM200 and RM100 million, respectively. The announced loss of RM5.7 billion would have made Malaysia without an operational central bank.
Was the claim by former BNM Adviser, Dato Abdul Murad Khalid of losses more than US$10 billion true? Deputy Umno Youth chief Khairul Azwan Harun claimed the loss to be more than RM30 billion at the exchange rate of the time.
The BNM annual report did not reflect the forex losses as an item but hidden in the balance sheet under deferred expenditure. The note explained:
“This represents the net deficiency arising from foreign exchange transaction in 1993. The government has undertaken to make good this deficiency as and when required to do so by the Bank. Nevertheless, the Bank will amortised the amount outstanding over a period of 10 years commencing 1994.”
Deferred expenditure is a cost that has already been incurred, but which has not yet been consumed. The cost is recorded as an asset until such time as the underlying goods or services are consumed; at that point, the cost was charged to expense.
In currency speculation, the purchase of one currency as asset means liability in another currency. The net asset is practically zero.
Central bank accounts are different from regular banks and companies. Could the “net deficiency arising from foreign exchange transaction” mean losses from forex trading? If that was the case, how could the loss be considered as assets not yet to be consumed?
Is this a misrepresentation of the true state of the accounts?
