MALAYSIAN RINGGIT COULD PLUNGE TO 1988 IF 1MDB DEBT UNPAID?

KUALA LUMPUR, Malaysia — Malaysia must resolve 1Malaysia Development’s (1MDB) debt issue or risk a negative chain of events, including a possible downgrade to the country’s credit outlook or a plunge in value of the ringgit, Datuk Seri Ahmad Husni Hanadzlah warned today.

Explaining this, the second finance minister said if Putrajaya is forced to shoulder the 1MDB debt of RM42 billion on top of its development expenditure of RM52 billion for next year, it would cause the government to fail to meet its targeted Budget 2015 deficit of 3.2 per cent and revert to over 4 per cent instead, he said.

• “What will happen? Our ratings will drop, when our ratings drop, our companies borrow from abroad, our currency value will drop like in 1998 then, when our ringgit at one point was over RM4, how to pay debts?
• “In our context, the main thing is we must solve the issue of debt so the people do not have to worry,” he said in a live interview broadcasted by national television channel TV1.
• During the 1997-1998 Asian financial crisis, the Malaysian currency dipped in value and at one point went over the RM4 mark in exchange rates against the US dollar.
• In March, Putrajaya said it is accountable for a US$3 billion (RM11.1 billion) loan secured by a 1MDB subsidiary using a letter of support from the Malaysian government.
• Last month, Moody’s Investors Services said government support of 1MDB could jeopardise Malaysia’s sovereign credit rating.

Today, Husni also insisted that the rationalisation of 1MDB’s assets is not meant to “save” it or the government, but is instead a “restructuring” exercise with the aim of paring down its debt.

He also said his key concern was Malaysians, citing the chain of negative effects that would happen if 1MDB’s debt had to be 
passed on to the government.

Source: The Malay Mail