Malaysia Expects to Pay $1.21 Billion to Cover 1MDB Interest Debt

Malaysia will spend 5.1 billion ringgit (U.S. $1.21 billion) to service the debt of scandal-ridden state fund 1MDB and its former subsidiary SRC International, in 2019 and 2020, its finance minister said Monday, ahead of a landmark court ruling on the case.

Minister Lim Guan Eng said that the government paid 210.66 million ringgit ($50.3 million) last week to cover interest due on a 2012 bond issued by a subsidiary of 1Malaysia Development Berhad (1MDB), while two other payments are due to be made next month.

About 219.2 million ringgit ($52.3 million) is to be paid on Nov. 11 and 143.75 million ringgit ($34.3 million) on Nov. 29 to cover other bonds, he said.

One report said 1MDB’s debt and liabilities – including interest – currently stands at 51 billion ringgit ($12.2 billion).

“The government is committed to pay up all loan obligation it inherited from the previous administration,” Lim said, referring to the scandal-tainted Prime Minister Najib Razak’s government which lost power in the country’s general election in 2018.

He said funds retrieved from recovered assets of 1MDB are being used to make the payments, adding that money could have been used to benefit Malaysian citizens.

Lim discussed the shortfalls on the same day Najib was in High Court listening to prosecutors discuss the case they built against him on seven charges related to the alleged illegal diversion of 42 million ringgit ($9.9 million) in funds from SRC International.

Prosecutor V. Sithambaram told the court that Najib knew the funds had been deposited to his personal account, according to state-run Bernama news agency.

“The submission claiming ignorance of the funds credited and checks issued out of the accused’s accounts by the defense cannot be accepted as credible especially since he was the then finance minister of Malaysia managing the finances of this entire country,” the prosecutor said in ending his case against Najib.

Najib’s defense team will present the case on Wednesday for dismissing the charges against him.

High Court Judge Mohd Nazlan Mohd Ghazali has set Nov. 11 as the date he will determine if the prosecution has made its case against Najib and if the defense must continue. Trial dates in December have been scheduled, if necessary.

Najib is standing trial at the same time on 25 charges of abuse of power and money laundering connected with 2.3 billion ringgit (U.S. $681 million) that went missing from 1MDB.

‘Kleptocracy’

In addition, the former prime minister is expected to face more trials on a total of 42 charges related to 1MDB’s loss of billions of dollars. The U.S. Justice Department, which has also filed criminal cases, called it the “worst kleptocracy scandal in recent times.”

Prosecutors and investigators in Malaysia, the United States and other countries have alleged that Najib, along with family members and associates, used 1MDB to line their pockets with cash and luxury items. Among those facing charges for their alleged roles are Najib’s wife, Rosmah Mansor, and fugitive financier Low Taek Jho (better known as Jho Low).

Najib founded 1MDB in 2009 to spur economic development in Malaysia.

Lim said Prime Minister Mahathir Mohamad, who succeeded Najib after his Pakatan Harapan coalition pulled off an election upset in May 2018, called it a miracle when Malaysia did not go bankrupt because of 1MDB.

“Mahathir said that one of the biggest challenges after overthrowing the kleptocratic regime was to clean up the damage left behind and to rebuild the country as it required much effort and financial stability,” Lim said.