KUALA LUMPUR, May 20 — PKR’s Rafizi Ramli today told three government-linked funds to pull out their investments in the troubled 1Malaysia Development Berhad (1MDB), claiming that billions of ringgit in public funds could potentially be exposed to a “cross default risk”.

The Pandan MP said it is in the depositors’ interest for Lembaga Tabung Haji (LTH), the Retirement Fund Inc (KWAP) and the Employees’ Provident Fund (EPF) to divest all shares and holdings in 1MDB, amid concerns Malaysia’s economy might crash as a result of reportedly poor management of the latter fund’s large debt pile.

“This will have a huge effect on the country’s financial market. It is better for KWAP, EPF and Tabung Haji to liquidate their investments now, rather than wait for the crash to happen,” Rafizi told a news conference in the Parliament lobby here.

“Prevention is better than cure… divest your investments to protect the interest of depositors,” he added.

A cross default is a provision meant to protect lenders by declaring a borrower to have defaulted on a loan if the borrower is found to have defaulted on other loan agreements.

Rafizi claimed that in the event of a cross default, the federal government’s main priority will be to repair the country’s finance system and that it will not act on any claims or grouses by KWAP, EPF or Tabung Haji.

In a written parliamentary reply to Pandan MP Rafizi Ramli yesterday, the ministry stated that EPF had put in RM1.52 billion while KWAP spent some RM1.4 billion in investments to 1MDB.

The ministry listed down Bandar Malaysia Sdn Bhd, 1MDB Energy Limited, 1MDB Global Investment Limited, and Jimah Energy Ventures Sdn Bhd (JEV) as the subsidiaries invested in by KWAP.

“For KWAP, its investments and holdings in 1MDB and its subsidiaries as of March 31, 2015 amount to RM1.4 billion,” the ministerial reply stated.

The written reply also stated that the EPF had invested RM1.52 billion in 1MDB subsidiaries Panglima Power Sdn Bhd (PPSB) and JEV.

But the Finance Ministry pointed out that EPF’s investments in PPSB and JEV were made back in 2003 and 2005, prior to 1MDB’s takeover of the two companies in 2012 and 2014.