KUALA LUMPUR, Sept 11 — Tun Dr Mahathir Mohamad has expressed concern over the debt being amassed by sovereign wealth fund 1MDB, warning that this could overwhelm Putrajaya’s already strained finances.
The former prime minister also questioned why Malaysia needed a state investment fund such as the 1MDB, pointing out that these were usually formed by countries with a surfeit of wealth and revenue, rather than one heavily in debt.
“Funds for 1MDB are not from the country’s surpluses. These are debts. Billions of ringgit owed will add to the country’s very high debts. Debts that the country must pay.
“If not, we will become bankrupt like Argentina. A country with a yearly deficit cannot possibly pay debts as high as this,” he wrote on his blog yesterday.
Dr Mahathir, who held the finance portfolio in the later days of his administration, suggested that 1MDB’s investments allowed Putrajaya to avoid parliamentary oversight for public spending, as these were not included in the Budget that is tabled annually.
He also said the off-budget investments could be used to circumvent the legal debt ceiling that Putrajaya is now just hovering under.
Malaysia's debt-to-GDP ratio stood at 53.8 per cent at the end of last year, close to an official debt ceiling of 55 per cent beyond which the government must seek parliamentary approval.
The fund has been dogged by negative publicity over massive fees paid for bond sales, the near one-year delay in publishing its financial accounts, and most recently, changing auditors.
1MDB, a brainchild of Prime Minister Datuk Seri Najib Razak, was set up to help drive Putrajaya's strategic investments.
