Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on June 13, 2018

KUALA LUMPUR: The Malaysian government has proposed to take up a soft loan from the Japanese government to help address the nation’s borrowing costs, said Prime Minister Tun Dr Mahathir Mohamad yesterday.

Speaking at a press conference in Tokyo yesterday that was streamed live via social media, Dr Mahathir said he is considering retiring some of the country’s existing debt by taking up the loan from Japan — dubbed “yen credit” — which would give a much lower interest rate than Malaysia’s present borrowings.

“I discussed with [Japan Prime Minister Shinzo] Abe about the soft loan that was provided by Japan [to Malaysia] when I was [the fourth] prime minister, with [an] interest rate of just 0.7% payable over 40 years.

“[Now] we have requested him to issue yen credit to Malaysia, and he said he will consider it,” said Dr Mahathir, who served as Malaysia’s fourth prime minsiter between 1981 and 2003.

According to Dr Mahathir, some of Malaysia’s existing borrowings are taken up at a “very high” interest rate of 6%.

“At times, [the government] offers [a] 10% commission to the people who facilitate these credits.

“So, if we borrowed RM100 million, we would have received RM90 million, but we still have to pay interest for a principle of RM100 million. This means the [effective] interest rate would be higher than 6%,” he said.

“We may be able to retire some of the high-cost borrowings that we have if we can reduce the [debt servicing] costs by taking up loans from other sources with lower interest rates,” he added.

However, Dr Mahathir said Japan would have a say on how Malaysia will utilise the borrowings, should the proposal be accepted.

The premier, who did not pinpoint the lenders of high-cost loans taken up by the previous federal government, added no specific amount has been discussed thus far for the soft loan.

The Malaysian government has previously announced that its debt had breached the RM1 trillion mark following a discovery exercise after certain “red files” that were only accessible to certain individuals during the previous administration were made available to the relevant departments to start consolidating their accounts and numbers.

Dr Mahathir was on his first official visit to Japan that started on Sunday as the seventh prime minister. He was scheduled to fly home yesterday afternoon.

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