(June 8): The huge debts of 1Malaysia Development Bhd (1MDB) poses no systemic risk to the country's economy, said Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar, despite public negativity towards Putrajaya's handling of the troubled state investor.

Wahid said the country's financial system was stable as the banks were well capitalised and there was ample liquidity in the market.

He also said Putrajaya has already met with credit rating agency Fitch to explain steps it was taking to deal with 1MDB, after the agency warned that it was downgrading the country's rating because of the RM42 billion debts the firm had chalked up.

"There is no systemic risk to the financial system," Wahid told reporters after attending the 2nd National Economic Summit in Kuala Lumpur today.

In March, business website Bloomberg reported that Malaysia faces a possible downgrade in ratings by Fitch due to a worsening trade balance and as 1MDB struggles to pay off its debts.

However, Wahid said two other rating agencies, Moody’s and S&P, have rated Malaysia as stable.

“We have met Fitch’s analysts (to explain the issue) and we leave it to them,” Wahid said.

Prime Minister Datuk Seri Najib Razak has been intensely criticised for how 1MDB has been managed and how it was allowed to chalk up so much debt.

Critics have pointed to the dubious business deals and loans 1MDB have issued as being the cause of the company’s problems, and claim that public funds will eventually be used to bail out the company.

Najib has pledged to audit the company and prosecute those found guilty of wrong-doing.

On a separate matter, Wahid refused to comment on the steep fall in the ringgit’s value to RM3.75 to the US dollar, its lowest in nine years.

“Exchange rates will move up and down but we will focus on the fundamentals, to restructure our economy, reduce the deficit, our debts and to maintain a current account surplus.” – The Malaysian Insider