Malaysian taxpayers paid over $1.7 billion for 1MDB debt so far

Malaysia’s finance ministry has used a total of 6.98 billion ringgit ($1.76 billion) in tax money since April 2017 to pay back accumulated debt of state fund 1Malaysia Development Berhad (1MDB), the country’s newly appointed finance minister Lim Guan Eng said at a press conference in Kuala Lumpur on May 22.

The sum included interest and coupon payments and a 5.05-billion-ringgit settlement made to Abu Dhabi-based fund IPIC, Eng said. More payments, totaling 954 million ringgit, will fall due between this month and November, and from 2022, more billions of ringgit for 1MDB liabilities will be payable.

“This confirms the public suspicion that 1MDB had essentially deceived Malaysians by claiming that debts have been paid via a ‘successful rationalisation exercise’ while it has been the finance ministry which has bailed out 1MDB,” he added.

He went on saying that it was clear that the previous government has conducted “an exercise of deception to the public and even misrepresented the financial situation to parliament.” Furthermore, treasury officials and the country’s Auditor-General were not able to access certain accounts and reports.

Eng noted that, after getting insight in the country’s state of finances, that Malaysia’s overall public debt could be now more than one trillion ringgit ($252 billion), a whopping 85 per cent of GDP, mainly owing to heavy spending for government mega projects, including former prime minister Najib Razak’s signature development of a new financial district in Kuala Lumpur, a new urban district plus transport hub in southern Kuala Lumpur and several large infrastructure and urban transport projects.

The actual debt figures revealed are much higher than the official figures reported by the old government of 51 per cent of GDP last year – which rating agency Moody’s described as already being “quite high” in a past report –  and more than $8,000 per capita, which is a fiscally unhealthy status.

Eng said that all mega projects will be reassessed and steps will be taken so the country could quickly recover from the situation.

“On a positive note, the fundamentals of our economy remain strong. Hence, once we are able to clean up the federal government finances, we will be able to further strengthen public and investor confidence in Malaysia,” he concluded.

The finance ministry earlier said the shortfall in revenue from the scrapping of the goods and service tax (GST) will be supported by specific revenue and expenditure measures that will be announced soon, including the reintroduction of the more moderate sales and services tax (SST) which was replaced by the GST in 2015 and has a varying, single-stage tax rate of between five and 25 per cent, depending on the goods and services it covers.

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Malaysia’s finance ministry has used a total of 6.98 billion ringgit ($1.76 billion) in tax money since April 2017 to pay back accumulated debt of state fund 1Malaysia Development Berhad (1MDB), the country’s newly appointed finance minister Lim Guan Eng said at a press conference in Kuala Lumpur on May 22.

Malaysia’s finance ministry has used a total of 6.98 billion ringgit ($1.76 billion) in tax money since April 2017 to pay back accumulated debt of state fund 1Malaysia Development Berhad (1MDB), the country’s newly appointed finance minister Lim Guan Eng said at a press conference in Kuala Lumpur on May 22.

The sum included interest and coupon payments and a 5.05-billion-ringgit settlement made to Abu Dhabi-based fund IPIC, Eng said. More payments, totaling 954 million ringgit, will fall due between this month and November, and from 2022, more billions of ringgit for 1MDB liabilities will be payable.

“This confirms the public suspicion that 1MDB had essentially deceived Malaysians by claiming that debts have been paid via a ‘successful rationalisation exercise’ while it has been the finance ministry which has bailed out 1MDB,” he added.

He went on saying that it was clear that the previous government has conducted “an exercise of deception to the public and even misrepresented the financial situation to parliament.” Furthermore, treasury officials and the country’s Auditor-General were not able to access certain accounts and reports.

Eng noted that, after getting insight in the country’s state of finances, that Malaysia’s overall public debt could be now more than one trillion ringgit ($252 billion), a whopping 85 per cent of GDP, mainly owing to heavy spending for government mega projects, including former prime minister Najib Razak’s signature development of a new financial district in Kuala Lumpur, a new urban district plus transport hub in southern Kuala Lumpur and several large infrastructure and urban transport projects.

The actual debt figures revealed are much higher than the official figures reported by the old government of 51 per cent of GDP last year – which rating agency Moody’s described as already being “quite high” in a past report –  and more than $8,000 per capita, which is a fiscally unhealthy status.

Eng said that all mega projects will be reassessed and steps will be taken so the country could quickly recover from the situation.

“On a positive note, the fundamentals of our economy remain strong. Hence, once we are able to clean up the federal government finances, we will be able to further strengthen public and investor confidence in Malaysia,” he concluded.

The finance ministry earlier said the shortfall in revenue from the scrapping of the goods and service tax (GST) will be supported by specific revenue and expenditure measures that will be announced soon, including the reintroduction of the more moderate sales and services tax (SST) which was replaced by the GST in 2015 and has a varying, single-stage tax rate of between five and 25 per cent, depending on the goods and services it covers.

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