KUALA LUMPUR, Feb 5 — 1 Malaysia Development Berhad’s (1MDB) multibillion-ringgit debt burden and worries over the state investment fund’s ability to repay it has sparked concerns of a greater fallout for the Malaysian economy, the Financial Times (FT) has reported.

The UK business news paper noted that 1MDB has borrowings of RM42 billion and described the sovereign wealth fund’s balance sheet as bearing the “scars of vast ambitions and politically-inspired dealmaking”.

“Clearly it’s opaque, clearly its debts have risen rapidly and are systemically relevant,” Andrew Colquhoun, head of Asia-Pacific sovereign ratings at credit ratings agency Fitch, was quoted saying.

FT noted that 1MDB has thrice made requests and was granted extensions on repayment deadlines for a RM2 billion loan led by Maybank, part of the RM6.5 billion that 1MDB paid tycoon Tan Sri Ananda Krishnan for his Tanjung Energy group.       

International news wire Reuters reported last month that Ananda, Malaysia’s second-wealthiest man, will lend 1MDB RM2 billion to settle its loan to Maybank and RHB Bank.  

The UK paper said 1MDB’s net debt of RM42 billion, as of the company’s latest published set of full-year accounts on March 31, appeared to have been driven mainly by its power and land purchases.

Fitch believed that 1MDB’s entire debt was not large enough to cause problems for the bigger Malaysian financial system if there was a default, but FT noted that the credit ratings agency was still concerned about the fact that the latest debt data was almost a year old.

“Lack of transparency means there could be other risks out there — other unknown unknowns,” Colquhoun was quoted saying.

1MDB CEO Arul Kanda Kandasamy reportedly said that as 1MDB is a strategic development company, there will “clearly be a mismatch in terms of our need to develop and expand our assets versus the cash that we get in from existing assets”.

He told FT that 1MDB was looking to “plug that mismatch through financing [bonds] or asset sales”.

Arul also reportedly said he has launched a “strategic review” of 1MDB “in terms of the strategic direction, the balance sheet, the debt and asset profile”.