Dr M: Yen credit to repay 1MDB debt

1MDB has debt papers; short and long terms which need to be serviced, including beyond 2030

By P PREM KUMAR & DASHVEENJIT KAUR / Pic By ISMAIL CHE RUS

The government will use a loan facility from Japan to pay for the 1Malaysia Development Bhd’s (1MDB) ringgit-and US dollar-denominated debts as the administration pares down the country’s ballooning borrowing problem.

The new administration has revealed the country’s chronic debt problems, citing borrowings of the troubled state-owned fund and other off-the-book loans as the official debts.

1MDB has debt papers; short and long terms which need to be serviced, including beyond 2030.

Prime Minister Tun Dr Mahathir Mohamad said the interest charge for 1MDB’s borrowings at 6% is straining the country’s finance.

He said the country will borrow from Japan the total of 1MDB’s US dollar and ringgit debts.

“Yen will be converted to US dollar to repay the US dollar-denominated borrowings,” Dr Mahathir said in Dewan Rakyat yesterday.

He was answering to a question from MP Datuk Seri Dr Ahmad Zahid Hamidi (Umno-Bagan Datuk) seek a loan from Japan.

Dr Mahathir said Malaysia had once taken a soft loan from Japan at an interest rate of 0.7% with a repayment period of 40 years.

“We are not sure if the Japanese government can give the same rate, but if we get a lower interest rate (loan), we won’t be burdened by a high debt that has an interest rate of more than 6% like the original loan.

“They (Japan) are already considering it and we don’t know how much, and what is the rate. We are already talking with the Japanese (government) and it is not easy for them to give soft loan to anybody. They have their own government to satisfy,” he added.

Dr Mahathir said the government is now saddled with all of 1MDB’s borrowings, although the agreement inked by the previous Barisan Nasional government granted a 10% commission to Goldman Sachs Group Inc.

“This means the government only receives 90% of the loan, but has to pay interest for 100% of the borrow- ings,” he said.

It was reported that Goldman Sachs raised US$6.5 billion (RM26.39 billion) in bond sales between 2012 and 2013 for 1MDB. But the US investment firm pocketed almost US$600 million for the deals. Goldman had defended the deals, claiming risks at the time of the issuance.

Meanwhile, Dr Mahathir said the government would borrow yen in the equivalent value to the US dollar due to the conversion differences.

“One yen is one US cent (but) RM1 is 25 US cent. The lower yen value does not mean the yen credit is cheaper. So, we will borrow yen in US dollar for the amount we owe,” he said.

Later, when asked by reporters at the Parliament lobby as to how much Malaysia would borrow from Japan, he said: “As big as we can.”

Meanwhile, Dr Mahathir had challenged the Opposition to show writ- ten proof that Malaysia’s debt was higher in the past than now.

“The country’s annual financial reports showed that past debts did not exceed RM300 billion, or 27% of gross domestic product at that time,” Dr Mahathir said, adding that these figures were provided in the annual reports of the 1980s and 1990s.

“If you could show a different set of figures, I’d appreciate it very much as it would mean I am wrong. But I was there (as PM) for 22 years, so I do know, to some extent, the figures for growth, finances and debt,” he replied to Ahmad Zahid’s query.

The former deputy PM had cited several figures in relation to the country’s debt to Japan in the 1980s and 1990s.

He said those with any proof should present it, adding that the country did not often hear the word “trillion”, but now the country’s debt has crossed RM1 trillion.

“I don’t know if RM1 trillion is less than RM300 billion,” he said.

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