KUALA LUMPUR, Sept 4 — Putrajaya may have to pay more to service the existing debts for 1MDB this year and next due to the current weak ringgit, Opposition MP Lim Guan Eng said today.
The Bagan MP asked if the government was not alarmed as there seemed little urgency to act.
“At RM3.35 to the US dollar when the three 1MDB bonds were issued, the principal amount of US$7.5 billion would come up to about RM21.8 billion,” he said in a statement. “At the exchange rate of RM4.45 to the US dollar, the principal amount due for the US$7.5 billion would be higher at RM29 billion — or RM7.2 billion more. A weaker ringgit this year means that the annual interest cost is closer to RM1.5 billion instead of RM1 billion,” he added.
The US dollar is now at a 28-year high against the ringgit, Lim noted. With three tranches of US dollar bonds totalling US$7.5 billion (RM33.5 billion) that were arranged by Goldman Sachs for the state investment fund in 2012 to mature this year and in 2023 when the strength of the US dollar is at its peak, taxpayers could be paying up to RM29 billion to service the bonds from RM21.8 billion.
The bonds were issued when the ringgit was exchanged at RM3.35 a dollar.
Lim alleged that leaders from the ruling party Umno were distracted by an internal power struggle, leaving the country with a far less effective government.
Umno appears to be divided into two camps, one backing Prime Minister Datuk Seri Ismail Sabri Yaakob who is the party vice-president, and the other rallying behind party president Datuk Seri Ahmad Zahid Hamidi who has been pushing for an early general election.
“In their frenzied pursuit of an early general election at all costs, Umno’s top leadership has stopped focusing on the state of the economy in the country, particularly soaring prices and food inflation, severe labour shortage as well as the cost impact of the depreciating ringgit,” said Lim, who is also on trial for corruption linked to the Penang undersea tunnel project valued at over RM6 billion.
“Malaysians are suffering a drop in the standard of living with the Consumer Price Index (CPI) increasing by 4.4 per cent and food inflation by 6.9 per cent for July 2022,” he added.
The former finance minister alleged that Putrajaya has given attention towards rising prices, but appears to care less about the negative impact of the depreciating ringgit especially on our foreign debt payments.
In April 2021, Malaysia sold US$1.3 billion (RM5.82 billion) of Sustainability Sukuk with US dollar at RM4.12, thereby raising RM5.35 billion for Malaysia.
The Edge reported that based on the level of US dollar at RM4.45, the ringgit-equivalent owed is now RM5.8 billion, or RM435 million higher, for the principal alone. The weaker ringgit means that total interest payments for the two sukuks are now about RM210 million extra by the end of the loan tenure before 2052.