Heavily indebted Malaysian state investment fund 1MDB says its entire board of directors has offered to resign after a parliamentary inquiry found mismanagement and called for a probe into the fund's former head.

In a report presented in Parliament on Thursday, the Public Accounts Committee said it found 1MDB's financial performance "unsatisfactory," with debts ballooning from 5 billion ringgit ($1.28 billion) in 2009 to 50 billion ringgit ($12.8 billion) this January.

The report said the government, which has given loans to the fund, could face losses of around 20.31 billion ringgit ($5.2 billion) if 1MDB fails to pay off its debts.

1MDB said the board believes its resignation is the right thing to do to facilitate any follow-up investigations.