WSJ: Najib govt used BNM to pay RM2b of 1MDB debts

Justin Ong
Arul Kanda was yesterday lambasted as being 'utterly dishonest and untrustworthy'. ― Picture by Yusof Mat Isa

KUALA LUMPUR, May 24 — The defeated Barisan Nasional government allegedly made Bank Negara Malaysia pay US$500 million (RM2 billion) of 1Malaysia Development Bhd’s (1MDB) debt, according to sources who knew of the deal.

The Wall Street Journal reported today that 1MDB was in financial distress late last year and lacked the cash flow needed to pay the sum owed to Abu Dhabi's International Petroleum Investment Company (IPIC).

The allegation corroborates Finance Minister Lim Guan Eng’s revelation that 1MDB cannot meet its debt obligations on its own, and needed the Finance Ministry to pay nearly RM7 billion of its debt and interests last year.

According to the WSJ report, funds that 1MDB claimed originated from its sale of power plants as part of its “rationalisation programme” had come instead from BNM through a land deal.

The WSJ’s revelation is the latest in the sordid scandal surrounding 1MDB, the extent of which is horrifying Malaysians and the new Pakatan Harapan administration.

Aside from the RM7 billion spent in 2017 alone to pay off 1MDB’s debts, Lim met with executives and officials of the state investment firm yesterday and came away with the conclusion that the firm was effectively insolvent.

He reserved the harshest comments for 1MDB president Arul Kanda Kandasamy who confidently went on a roadshow ahead of the general election to convince Malaysians that the 1MDB issue was resolved and that no wrongdoing was involved.

However, in his meeting with Lim yesterday, the minister said Arul claimed to have no idea about the condition of the firm’s finances or whether the billions of ringgit in “units” even existed, despite previous insistence that these existed and were redeemed.

Lim later dubbed Arul Kanda “utterly dishonest and untrustworthy.”

In the declassified Auditor General’s audit of the state investment firm, it was also shown that the firm still required over RM42 billion to clear its liabilities, suggesting that it was as debt-ridden now as when the scandal first emerged three years ago.

The report also showed that the firm still needed over RM1.5 billion annually until 2024 just to service the debt. It is unclear how 1MDB would have made these payments without government aid as the firm has wound down most of its operations and lacked any clear revenue streams.

The firm is now the subject of a multi-agency investigation ordered by Prime Minister Tun Dr Mahathir Mohamad.

Former prime minister Datuk Seri Najib Razak is due back at the Malaysian Anti-Corruption Commission this morning for further questioning over a RM2.6 billion “donation” that is believed to have originated from 1MDB.

He is also under investigation over the transfer of RM42 million from a former subsidiary of the firm.

Investigators are still determining the value of foreign currencies and valuables seized from his various residences, but the figure has already exceeded RM100 million in cash alone.