Govt will honour 1MDB debt obligations, says finance minister

Failure to honour any debt obligations related to 1MDB will have negative implications


The government will pay the US$50.3 million (RM206.23 million) 1Malaysia Development Bhd (1MDB) debt which is due at the end of the month, said Finance Minister Lim Guan Eng (picture)

He said the failure to honour any debt obligations related to the fund would result in a default by the government and welcome other negative implications, especially to the country’s ratings.

“We don’t want the government to default. Besides, that will also affect our sovereign credit ratings…not just one level down…it could be a few levels down,” he told reporters in Kuala Lumpur yesterday.

The debt-ridden 1MDB has a debt obligation of US$50 million which is due this month.

The fund’s debts are guaranteed by the government, transferring all financial liabilities to Putrajaya.

“We definitely will pay our dues, honour our legal commitments, the legitimate commitments made by the previous government. Otherwise, it will be defaulted.

“If it is BN (Barisan Nasional) who is defaulting, it is a different issue. But, it is the Malaysian government in default. We won’t allow it to go into default,” he added.

The government has also sought advice from the Attorney General’s Chambers who said Malaysia must honour its legal commitments.

Meanwhile, Lim said MMC Gamuda KVMRT (T) Sdn Bhd is welcomed to participate in the international tender process for Mass Rapid Transit Line 2’s (MRT2) unfinished underground work.

“The project continues. Hopefully at a cheaper price. It can still be the MMC Corp Bhd-Gamuda Bhd joint venture (JV), or any other company. They are welcomed to bid for it,” he said.

Lim also said the MMC-Gamuda JV’s offer to reduce the construction cost of the balance of the uncompleted underground works by RM2.3 billion, or 24%, to RM7.3 billion from RM9.6 billion is still “inadequate”.

“The government believes we can get higher savings from (the international) open tender,” he said, adding that no timeline has been set for the exercise.

Yesterday, the JV company said it remains open to further discussions with the Finance Ministry on how to proceed with the project.

On Sunday, Lim announced that the government had decided to terminate the underground work contract of the MRT2 with MMC Gamuda KVMRT, after the government sought to achieve a lower construction cost.

The minister also said MMC Gamuda KVMRT will receive compensation for work done for the completed portion of the underground works, although details have not been finalised.

MMC’s share price rose 2.65% yesterday to close at RM1.16 as investors expect the consortium could still play a role in the project.