PUTRAJAYA (May 27): The Federal Government is writing off a sum of RM3.8 billion worth of rural area water supply projects-related loans owed by State Governments.

Speaking at a press conference after chairing the annual National Finance Council (Majlis Kewangan Negara) meeting with all the Chief Ministers and Menteri Besar of the States today, Prime Minister Tun Dr Mahathir Mohamad said this is meant to support rural water supply projects.

"Rural water supply project usually does not generate huge income, hence the meeting today agreed to write off outstanding debts (related to rural water supply projects) due from State Governments from 2001 onwards, amounting to RM3.8 billion," he said.

On top of that, Dr Mahathir said moving forward, rural water supply projects will not be funded via loans from the Federal Government, but instead be funded in the form of grants through the Rural Development Ministry.

The 93-year-old premier also said the meeting today agreed to an additional RM60 million allocation to State Governments for forest reserve and marine preservation purposes, as a way to help the lower-income States.

Dr Mahathir also reiterated the Federal Government's commitment to share half of the tourism tax collected from the States to the State Governments for them to maintain and improve their tourism facilities as well as market and promote their tourism destinations.