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Mahathir Mohamad

Malaysia’s US$251 billion debt, millions more looted – and new PM Mahathir Mohamad is taking aim at predecessor Najib Razak

Mahathir said last week that many of the figures recording the country’s financial position may be false

PUBLISHED : Monday, 21 May, 2018, 1:38pm
UPDATED : Monday, 21 May, 2018, 10:02pm

Malaysia is saddled with over 1 trillion ringgit (US$251.70 billion) in debt, Prime Minister Mahathir Mohamad said on Monday, blaming the previous government led by former protégé Najib Razak who now faces domestic graft investigations.

Mahathir, 92, led an opposition coalition to a spectacular win over Najib’s previously undefeated ruling alliance in a general election on May 9, having campaigned aggressively over people’s rising living costs and a multibillion-dollar scandal at state fund 1Malaysia Development Berhad (1MDB).

“We find that the country’s finances for example, was abused in a way that now we are facing trouble settling debts that have risen to a trillion ringgit,” Mahathir said when speaking for the first time to staff of the prime minister’s office.

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“We have never had to deal with this before. Before we never faced debts higher than 300 billion ringgit, but now it has climbed to 1 trillion ringgit.”

In his first week in charge, Mahathir announced that a broad-based goods and services tax (GST) would be zero-rated from June 1, as his government works to replace it with a reinstated sales and services tax (SST).

Mahathir had also promised to reintroduce fuel subsidies besides doing away with GST, all part of his coalition’s pledge to tamp down rising living costs.

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Mahathir’s fiscal measures, however, would widen Malaysia’s fiscal deficit and are credit negative without any offsetting measures, according to ratings agency Moody’s.

Najib’s government had planned to collect 43.8 billion ringgit (US$11.05 billion) in 2018 in GST, about 18 per cent of total revenue.

During the election campaign, Najib had warned that Mahathir’s economic proposals would result in debt ballooning to over 1 trillion ringgit.

Najib also rebutted opposition claims that federal debt had risen to alarming levels under his governance, and said that debt amounted to about 50.9 per cent of its GDP at June 2017, which was below the government’s limit of 55 per cent.

Mahathir said last week that many of the figures recording the country’s financial position may be false.

Also Monday, Malaysia set up a task force to probe allegations that billions of dollars were looted from sovereign wealth fund 1MDB in an audacious fraud overseen by Najib.

The new task force will be charged with seizing back assets and pursuing legal action against those suspected of breaking the law in relation to the fund, said the prime minister’s office.

“The government hopes the setting up of this task force, comprising a multi-agency enforcement unit, will help restore the dignity of Malaysia that has been tainted by the 1MDB kleptocracy scandal,” said Mahathir’s office.

The task force will include representatives of the anti-graft agency, the police and the attorney general’s office.

Some of those on the body were part of previous probes into the controversy but were pushed out by Najib’s regime as he moved to shut down domestic investigations.

Several current and former senior government officials will lead the task force, including Abdul Gani Patail, the former attorney general who was removed from his post in 2015 as he was leading investigations into 1MDB.

Malaysia’s anti-graft agency has summoned Najib to give a statement on Tuesday in connection with a probe on SRC International, a former unit of 1MDB.

The summons came days after police raided six premises linked to the former prime minister as part of investigations into the state investment fund that Najib founded in 2009.

Among the items seized include 284 boxes of designer handbags and dozens of bags filled with cash and jewellery, from a luxury condominium in the centre of Kuala Lumpur linked to Najib.

Mohd Shukri Abdull, the new chief of the Malaysian Anti-Corruption Commission (MACC) told reporters to expect a “special briefing” on Tuesday.

Additional reporting by Agence France-Presse