1Malaysia Development Bhd (1MDB) has a RM2 billion loan due to be repaid on the 31 January 2015, a week ago. The Malaysian financial markets have been jittery over the ability of 1MDB to repay this debt because the deadline for repayment of the debt has not only been extended twice since November 2014, 1MDB actually has total outstanding loans exceeding RM42 billion.
This RM2 billion loan itself is part of a rescheduled and restructured debt it couldn’t pay in November 2013. The Edge Financial Daily even reported that Bank Negara Malaysia has summoned the key executives of 1MDB over the issue and warned them of dire consequences should they fail to meet the next deadline at the end of January.
If 1MDB defaults on the RM2 billion loan, then the entire outstanding debt of 1MDB becomes due. Under such circumstances, the Malaysian financial system may collapse under the enormous stress while the Government’s credit ratings is bound to take a massive hit.
Hence the ability of 1MDB to repay this loan has become in irrefutable public interest issue which must be addressed, whether by 1MDB itself or the Finance Ministry in a timely manner.
Over the past 3 weeks there has been intense speculation as to how 1MDB will repay the debt. These speculations included that 1MDB will officially seek another extension for its loans, or that 1MDB will receive an emergency loan from Tan Sri Ananda Krishnan to temporarily settle the debt.
However, a week after the last deadline to repay the debt, there has been a pin-drop silence as to whether 1MDB has been able to repay this RM2 billion loan. Such silence only leads to the inevitable speculation that despite all the rhetoric coming from the Government and 1MDB, the company has once again failed to meet the deadline.
This is despite the fact that 1MDB claimed that it had already fully “redeemed” its controversial investment in Cayman Islands, amounting to US$1.1bn or RM3.9bn, at the current favourable exchange rate. Nobody appears to know where the money is, and for those who do know, they have refused to be publicly accountable for 1MDB’s actions.
The Finance and Prime Minister, Dato’ Seri Najib Razak can no longer afford to remain silent on this issue without further eroding the confidence of the financial markets. His Deputy Finance Minister, Datuk Ahmad Maslan has consistent insisted that 1MDB was in sound financial health and never had any problems settling their debt obligations. Such empty assurances, or even outright untruths can no longer hoodwink the concerned Malaysian public.
The Government must immediately come clean with the above debt situation in 1MDB, which has even become a laughing stock in the international financial press – Wall Street Journal and Financial Times. I reiterate my earlier call for Dato’ Seri Najib to instruct a special audit of 1MDB by the Auditor-General or a reputable independent auditor to uncover its financial shenanigans.