Malaysia Government 1MDB Debt Economic Woes Claim Justified?
The current Malaysian government, led by Prime Minister Anwar Ibrahim, has frequently cited the 1MDB scandal as a significant burden on the nation’s finances. However, a closer examination of the numbers reveals a more nuanced situation.
The RM48 billion mentioned by the Second Finance Minister in Parliament refers to the total principal and interest accumulated since the inception of 1MDB, not to a single year’s repayment. Significant debt repayments occurred between 2016 and 2017, reducing 1MDB’s liabilities by RM18 billion following the sale of Edra Energy. By 2018, post the 14th General Election, 1MDB’s debt stood at approximately RM32 billion.
Since then, the government has recovered around RM30.2 billion through various settlement agreements. This includes firstly, RM29.03 billion recovered by February 2024. Secondly, RM721.4 million from the DOJ in June 2024. And finally, an additional US$100 million expected from the DOJ. These recoveries significantly reduce the alleged losses from 1MDB, estimated at US$4.5 billion (around RM13.4 billion to RM21.2 billion, depending on exchange rates).
Economic Contributions from 1MDB to Malaysia
Furthermore, Najib’s government had signed a settlement with IPIC in 2017 to return US$7.5 billion by December 2020. The 2018 PH1.0 administration strangely canceled this agreement. Despite this setback, the funds recovered so far exceed the amount initially claimed to be lost. Additionally, 1MDB’s borrowed funds facilitated significant national projects. These national projects include the TRX project worth RM40 billion, the Bandar Malaysia project valued at RM140 billion, and the construction of a 5km tunnel system to alleviate traffic congestion in Kuala Lumpur.
As of today, 1MDB’s remaining debt stands at RM5 billion, with repayment due in 2039. The 1MDB trust account balance as of September 2023 was RM5.15 billion, with an additional RM4.65 billion expected from IPIC in 2024. This effectively means the 1MDB debt and interest are largely settled.
In the past two years, Malaysia has faced significant economic challenges, with the ringgit performing poorly against the USD and other ASEAN currencies. The ringgit has become the worst-performing currency in the region, reflecting broader economic struggles. Additionally, Malaysia’s economic growth has lagged behind its regional peers, with lower foreign direct investment (FDI) and slower GDP growth. These economic indicators highlight the need for comprehensive policy responses to restore confidence and drive sustainable growth.
Compounding these economic issues, the Malaysian government has adopted austerity measures, including the removal of fuel subsidies and other people-centric initiatives. These measures have further strained the financial situation of ordinary Malaysians, adding to the economic burden on the population.
Prime Minister Anwar Ibrahim’s references to 1MDB debts as a major economic burden require context. The government has successfully recovered substantial amounts, and 1MDB’s investments continue to generate returns. While the 1MDB saga has had significant implications, it is not the sole factor influencing the country’s economic performance. Unbelievable election promises and lacklustre economic policies are the cause. The administration must address broader economic policies to achieve sustainable growth and stability.
