A former senior official at Malaysia's central bank yesterday made an explosive allegation against former finance minister Anwar Ibrahim, in his testimony during the first day of an inquiry into billions of dollars lost in foreign exchange trades in the 1990s.

Datuk Abdul Murad Khalid, a former assistant governor at Bank Negara Malaysia (BNM), claimed that Anwar said he would have to resign as finance minister if the full extent of BNM's forex losses were revealed.

Mr Murad told the Royal Commission of Inquiry (RCI) that he was instructed by then-BNM governor Jaffar Hussein in 1994 to explain the forex losses to Anwar, who is now an opposition leader.

"Anwar had asked me to join him on his flight to Hawaii to provide an explanation on the forex losses, as instructed by Jaffar. After explaining (the matter) to Anwar, he said he understood the losses and that he would discuss it with Tan Sri Jaffar Hussein," he told the inquiry.

Mr Murad added: "After I gave him the explanation, Anwar commented that should the true figures of the forex losses be revealed to the public, he would have to resign as finance minister."

Anwar was Malaysia's finance minister from 1991 to 1998.

The RCI was formed to investigate the forex losses scandal that erupted when Tun Dr Mahathir Mohamad was prime minister. Like Anwar, Dr Mahathir is also now an opposition leader arrayed against Prime Minister Najib Razak.

Mr Murad's allegation is explosive because he has now named Anwar alongside Dr Mahathir as someone who knew about the central bank's losses.

Mr Murad also testified yesterday that Tan Sri Jaffar was unaware of the magnitude of the forex losses, which Mr Murad claimed to be at least US$10 billion.

The RCI concluded yesterday that BNM had lost around RM31.5 billion in forex trades over 20 years ago and that the figure had been concealed from the bank's reports.

Its chairman, Tan Sri Mohd Sidek Hassan, said: "We have made a finding today that Bank Negara lost RM31.516 billion between 1991 and 1994. The figure, however, is hidden from Bank Negara's reports.

"We will find out who was responsible in asking for it to be concealed," he said, before adjourning the proceedings.

Earlier, former BNM employee Abdul Aziz Abdul Manaf told the five-man panel the central bank suffered RM31.516 billion losses in forex trading.

But it was unclear how the losses were calculated.

Datuk Tajuddin Attan, a panel member, asked Mr Aziz to explain why the central bank's reserves appeared unaffected by the losses in the later years.

But Mr Aziz said he was unable to give details on how the losses occurred as he had provided only an "accounting treatment".

Earlier, the panel had dismissed an attempt by the central bank to have the probe conducted behind closed doors on the grounds that it involved classified documents.

A BNM lawyer said revealing the documents to the public may implicate the witnesses who are slated to testify in the case.

"Two witnesses from BNM have no immunity for criminal action to breach OSA (Official Secrets Act). We have an alternative suggestion - exclude the investigation to the press and public," Mr Tan Hock Chuan said in court on Monday.

However, Mr Mohd Sidek disagreed. "This is an inquiry, nobody is on trial. I'm told that under the Act... commissioners have powers... Therefore, from now, I'm going to continue without delay the inquiry. If everything is under OSA, what's the point of having an inquiry," he said.

Two witnesses - former BNM employee Ahmad Hizzad Kamaruddin and Mr Abdul Aziz - testified earlier yesterday.

The inquiry stemmed from Mr Murad's claims in January that the central bank suffered foreign exchange losses of up to US$10 billion in the 1990s, far more than the RM9 billion loss that was publicly reported at the time.

The forex losses scandal was among the biggest from Dr Mahathir's time as prime minister. The scandal led former BNM governor Mr Jaafar to resign.

The inquiry will take place over 10 days up to Sept 21, with its report to be submitted within three months from July 15, the date the RCI was established.

The RCI is chaired by Mr Mohd Sidek and its members include former Federation of Malaysian Manufacturers president Tan Sri Saw Choo Boon, High Court judge Datuk Kamaludin Md Said, Bursa Malaysia chief executive Mr Tajuddin and Malaysian Institute of Accountants member Pushpanathan Kanagarayar.