Bond funds give Malaysia a wide berth as 1MDB debt rises to $250b

The Tun Razak Exchange (TRX) project, developed by 1Malaysia Development Bhd. (1MDB), foreground, stands under construction as buildings stand illuminated in the distance at dusk in Kuala Lumpur, Malaysia, on Friday, July 17, 2015. Photographer: Goh Seng Chong/Bloomberg

The escalating scandal around troubled state-investment-fund 1MDB is turning bond funds against Malaysia.

The disclosure that the nation’s debt is almost 60 percent higher than previous estimates at 1 trillion ringgit ($250 billion), largely because of hidden liabilities tied to the troubled state investment fund, is convincing even fans of the country’s bonds to cut their holdings. Throw in the removal of a goods and services tax last month, and Prime Minister Mahathir Mohamad’s new government faces an increasing fiscal squeeze.

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