KUALA LUMPUR: Tun Dr Mahathir Mohamad has raised questions about the heavy debt and usage of funds at 1MDB in his first open criticism of the controversial government-owned investment company started by Prime Minister Datuk Seri Najib Razak.
Writing in his blog, he noted that 1MDB had spent billions of ringgit buying power plants from Genting and Ananda Krishnan and had paid above-market prices for them.
He also lamented that 1MDB is heavily indebted. It has debt of around RM38 billion after just five years in operations.
“The money for 1MDB is not from the country’s surpluses. It is debt, billions of ringgit of debt that has added to the already high national debt,” Dr Mahathir wrote.
The former prime minister, who recently wrote that he was withdrawing support for Najib, said as the government was already facing a deficit budget problem, it would not have the ability to help pay the 1MDB debt.
He also noted that a large part of the money raised from the issue of debt paper by 1MDB has been sent to the Cayman Islands, a move which many have questioned.
Critics have complained about the lack of transparency in how the money is managed out of Cayman and it has been estimated that at least RM18 billion of 1MDB’s money is parked there.
Dr Mahathir noted that the government’s spending has been exceeding its revenue including money from Petroliam Nasional Bhd (Petronas) and that is why the budget has been in deficit.
He warned that no governments can continue to run budget deficits, with a high level of debts. “A country must pay its debt, or else it will be bankrupt like Argentina.”
This article first appeared in The Edge Financial Daily, on September 11, 2014.