Former Malaysian PM Najib says higher fiscal deficit not due to 1MDB

Najib Razak arrives at court in Kuala Lumpur on Aug. 8. Photographer: Samsul Said/Bloomberg

Former Malaysian prime minister Najib Razak said the wider fiscal deficit projected in the country’s Budget 2019 was mainly on account of the removal of the Goods and Services Tax (GST) and not due to the scandal-ridden 1Malaysia Development Bhd (1MDB).

“The root cause of the increase in fiscal deficit is because they abolished GST and the three-month tax holiday. It were these shortfalls that have been haunting the finance minister, forcing him to put all the fiscal constraint blame on 1MDB. It is obvious that they want to put all the blames on the Barisan Nasional government and 1MDB. But they did not mention about 1MDB’s assets. 1MDB has many assets. If we monetise them at the right price, the proceeds can offset the company’s debt,” he said to the local media on November 2, after the tabling of the national Budget 2019.

According to finance minister Lim Guan Eng, who tabled Budget 2019 on the same day in Parliament, Malaysia’s fiscal deficit is expected to reach 3.7 per cent this year, due to the previous government’s  expenditure.

In his budget speech, Lim added that the previous government was secretly paying for the debts of 1MDB amounting to nearly RM7 billion as at April 30, 2018.

“Despite that, we have also confirmed that we may be liable to pay up to RM43.9 billion more to settle all of 1MDB’s debt,” he added.

However, the government is working hand-in-hand with foreign governments to recover seized cash and assets related to 1MDB.

“The government will take all necessary actions to recover funds lost and stolen from 1MDB. On October 30, 2018, we have applied to the Courts of England for an order to set aside a Consent Award recorded on May 8, 2017 by an Arbitration Tribunal sitting in London between International Petroleum Company (IPIC) with Aabar Investments PJS, and 1MDB with our Minister of Finance Inc. Malaysia is using fraud as a reason not to pay the balance of $4.32 billion to IPIC or Aabar under the Consent Award, and recover the $1.46 billion already paid,” said Lim.

The Malaysian government has recently seized a $250 million luxury yacht believed to be linked to 1MDB and it is being put up for a 1-month international auction beginning today.

Lim said the government will also be leveraging the country’s assets to pare down the national debt which currently stands at RM1,065 billion ($255 billion) where RM725.2 billion ($173.7 billion) are direct federal government debt, RM155.8 billion ($37.3 billion) in committed contingent liabilities and RM184.9 billion ($44.3 billion) in other liabilities including leased payments for Public Private Partnership (PPP) projects.

“Where the opportunity arises and when the government is able to realise the full value of our non-core assets, we will seek to reduce our stake in these non-strategic companies and utilise the proceeds to pare down debt. We will plan scheduled and staggered land sales via auction to the highest bidders, based on conditions imposed on the land, to maximise revenue for the government,” he said.

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