SINGAPORE—Malaysia’s former Prime Minister Najib Razak can serve the remaining two years of his sentence for abuse of power in the looting of the 1MDB sovereign-wealth fund under house arrest, the government said Friday.

The pardon is conditional on Najib paying a fine of 50 million ringgit, equivalent to around $12 million, and relates to the former leader’s 2020 graft conviction—a watershed moment in one of the largest financial crimes of the century that touched jurisdictions from Switzerland to Curaçao, as well as the U.S.

Friday’s pardon doesn’t appear to extend to a separate case, in which Najib was sentenced to 15 years in prison for money laundering and other crimes also linked to the now-defunct Malaysian sovereign-wealth fund in December. That case is currently still under appeal.

The pardon signals that Malaysia’s king, who granted it, and parts of the country’s ruling elite are ready to move on from the 1MDB scandal, in which some $4.5 billion was allegedly misappropriated during Najib’s premiership. Hundreds of millions of dollars landed in the private bank accounts of Najib, The Wall Street Journal has previously reported.

“This signals the royal support for clemency for Najib and a changing climate that’s taking place in Malaysian politics,” said Bridget Welsh, a Kuala Lumpur-based political analyst and honorary research associate at the University of Nottingham in the U.K. “This of course can spill over into other legal cases as they move forward.”

Najib, 73, had a close relationship with Jho Low, the fugitive Malaysian financier and alleged mastermind of the scheme. The siphoned funds financed luxury real estate, a $250 million superyacht and the Hollywood film “The Wolf of Wall Street,” according to the U.S. Justice Department.

Najib, the scion of a powerful political family whose father and uncle both served as prime ministers, has always denied the charges against him. The 1MDB scandal ended the six-decade run in power of his party, the United Malays National Organization.

Under the terms of Friday’s pardon, he could be a free man by August 2028.