KUALA LUMPUR (Reuters) - Malaysia’s previous government committed to making lease payments of 201.4 billion ringgit ($50.62 billion) for several projects that were designed to circumvent the federal government guarantee and debt limits, the new finance minister said on Thursday.
The lease obligations, along with official debt and government guarantees, bring Malaysia’s total debt and liabilities to about 1.087 trillion ringgit as of Dec. 31 2017, or 80.3 percent of gross domestic product, Finance Minister Lim Guan Eng told a news conference.
Prime Minister Mahathir Mohamad, who led an opposition alliance to victory over Najib’s Barisan Nasional coalition on May 9, said this week that Malaysia’s debt had climbed to over 1 trillion ringgit due to abuses by Najib’s government.
His comments created some uncertainty as the central bank had put the official debt figure at about 685 billion ringgit at the end of last year.
But Lim’s explanation about the lease obligations spelt out how the government’s liabilities had ballooned.
Lim said Najib’s administration committed the government to making lease payments for rental, maintenance and other charges for public private partnership (PPP) projects such as the construction of schools, roads and hospitals.
“The lease commitments, which were designed specifically to circumvent the federal government guarantee and debt limits, amounts to 201.4 billion ringgit (as of 2017),” he said.
Earlier this week, Lim said the Najib government had deceived the public and parliament over the country’s financial situation and state fund 1Malaysia Development Berhad (1MDB). He also said treasury officials and the country’s auditor general were unable to access certain accounts and reports in the finance ministry.
In a late night Facebook post on Wednesday, Najib said Mahathir and his finance minister’s “alarming and confusing” remarks about the country’s debts and 1MDB liabilities “tell half the story” and had caused the stock market to fall.
Trinh Nguyen, senior economist at Natixis, said the markets had been aware of the government debt and guarantees, but did not know about the lease commitments.
“The question is whether the PPP debt generates any income, or is it similar to 1MDB, which basically is insolvent,” she said, adding that if the PPP debt is self-sustaining, it will not take a lot out of the expenditure budget.
Immediately after the election win, Mahathir reopened investigations into 1MDB and barred Najib from leaving the country. He has also vowed to review several policies and projects implemented by Najib’s government.
Najib returned to Malaysia’s anti-graft agency on Thursday to resume his explanation for the suspicious transfers of $10.6 million dollars into his bank account.
Reporting by Joseph Sipalan, Praveen Menon and A. Ananthalakshmi, Editing by Simon Cameron-Moore