KUALA LUMPUR: An opposition lawmaker has raised concern that the government may need to use public money to repay SRC International Sdn Bhd’s RM4 billion loan from Kumpulan Wang Persaraan (Diperbadankan) (KWAP).

SRC International is wholly-owned by the Ministry of Finance (MoF).

PKR Pandan Member of Parliament Rafizi Ramli said SRC International’s financial situation is worrying as it not only posted a RM164.35 million loss for the financial year ended March, 2014 (FY14), but also an impairment loss on an available-for-sale investment of RM115.25 million.

“The impairment loss of RM115 million is worrying because SRC International’s investment comes from the public pension fund (KWAP) through a RM4 billion loan,” Rafizi told a press conference at the Parliament lobby yesterday.

Should the situation of default happen, Rafizi said the government would have no choice, but to inject public funds into the pension fund. “This is already [considered] a bailout by the public, because SRC International is wholly-owned by the MoF,” Rafizi said.

Citing SRC International’s audited financial statement for FY14, Rafizi pointed out that the company has a RM3.1 billion Tier 3 asset, which means that the risk of real impairment is far higher. “I will not be surprised if SRC International continues to record impairment losses in the coming years when the unknown investment fails to generate income for SRC International,” Rafizi said.

Last week, Rafizi revealed that SRC International had invested some RM3.81 billion of the RM4 billion borrowed from KWAP in “open-ended” funds that cannot be identified nor classified. SRC International did not generate any revenue in FY14 and FY13.

Rafizi also questioned whether the additional RM1.25 billion fund sought by the government through the Supplementary Supply (2014) Bill 2015 to be injected into KWAP, was due to the latter’s incapability to pay pension to the retired civil servants. “It could be that the projected earnings for KWAP were not met, which is why they (federal government) had asked for the supplementary budget to address the shortage of funds,” Rafizi quipped.

Meanwhile, he also urged Prime Minister Datuk Seri Najib Razak to include SRC International in the list of companies related to 1Malaysia Development Bhd (1MDB) to be audited by the Auditor-General. SRC International was formerly a company owned by 1MDB.

This article first appeared in The Edge Financial Daily, on April 2, 2015.