KUALA LUMPUR -- Bank Negara Malaysia Governor Muhammad Ibrahim has submitted his resignation amid allegations of funds from a land sale to the country's central bank being linked to scandal-plagued state fund 1Malaysia Development Berhad.
"We have accepted the governor's resignation," Prime Minister Mahathir Mohamad told reporters on Wednesday without giving the reasons. He added that a replacement will be announced after getting the royal consent, an administrative procedure for top government nominations.
Local news reported that Muhammad, who is half way through his five-year term, would be replaced by Nor Shamsiah Yunus, a former deputy governor of the bank.
The central bank in a statement on Wednesday said it will "ensure a smooth transition in the handing over of duties to the new governor," whom it did not identify.
Bank Negara Malaysia has come under fire after Lim Guan Eng, the newly-installed finance minister, alleged that funds from a land sale to the central bank had been used to service some of the debts of 1MDB. The bank paid 2.06 billion ringgit ($519 million) in December 2017 for a plot of government land at market value, an uncommon transaction between government bodies.
Harvard University graduate Muhammad was appointed governor on May 1, 2016, replacing the retiring Zeti Aziz. In July that year, he cut interest rates in a surprise move to boost economic growth amid uncertainty in the aftermath of the U.K.'s decision to leave the European Union. The Overnight Policy Rate was returned to the 3.25% mark in January against a growth trajectory supported by domestic spending and exports.
Under Muhammad's watch, the central bank introduced regulatory controls on foreign currency trading to stem the volatility of the ringgit.