KUALA LUMPUR, Sept 15 — Putrajaya needs to implement potentially unpopular reform measures to stabilise the country’s economy, Lim Kit Siang said today after the government announced plans to inject RM20 billion into Bursa Malaysia to prop up a flagging stock market.

The DAP parliamentary leader said the fund injection announced by Prime Minister Datuk Seri Najib Razak yesterday is only a stop-gap measure that will not deal with the fundamental issues eating away at Malaysia’s financial stability.

Lim said the only real option available to the country is to have austerity measures and tightened borrowings by the public sector in place, along with deregulation and divestment of government stakes in GLCs.

Putrajaya at the same time must pursue a transparent resolution to the 1Malaysia Development Berhad (1MDB) fiasco and the RM2.6 billion donation made to Najib’s private bank accounts to restore credibility in Malaysia’s governance, he added.

“Some of these measures are likely to be attacked by vested interests and Najib in his weakened state cannot take them on. However it will ultimately be needed,” Lim said in a statement.

“It must be noted that a continued avoidance of unpopular measures could lead to a deepened crisis and the government may be forced into accepting externally-forced measures e.g. an IMF programme ala the Greek situation. A heavy price for the country,” he added.

Lim acknowledged that the current slowdown is largely due to global trends such as the fall in commodity prices, the strengthening US dollar and the slump in China.

The situation, however, is compounded by domestic events and policy failures such as 1MDB, the RM2.6 billion donation issue, weak governance and Putrajaya’s alleged unwillingness or inability to deal with the country’s debt, Lim claimed.

“Najib has turned his back on much needed reforms as he has pandered to vested interests who have strengthened their hold on him in return for support.

“What is clearly needed are drastic measures,” Lim said.

Najib yesterday announced the revival of defunct equity fund ValueCap to help boost underperforming shares and stabilise the financial market.

For this purpose, he announced a RM20 billion injection for the fund, initiated back in 2002, and added that he is confident it could provide a lifeline to the financial market.

Among ValueCap’s shareholders are key state investment fund Permodalan Nasional Berhad, state-owned Employees Pension Fund (EPF) and Khazanah Nasional Berhad, which Najib said had profited much from ValueCap’s set-up then.

ValueCap was mired in controversy during the Mahathir administration and faced allegations that the fund was meant to be used as a vehicle to bail out underperforming companies seen close to the ruling coalition.

Putrajaya denied the allegation, insisting that the investment fund was established to help nudge capable but undervalued companies.