By Malaysiakini
Weakening ringgit adds a colossal RM4 billion burden on controversial 1Malaysia Development Bhd (1MDB)’s tab, blowing up debt levels to RM25.7 billion.
The drawback from the ringgit’s 6.5% slide, in the past nine months, is about the same amount spent to build the klia2.
Although maintaining that everything is above board, the firm chaired by Prime Minister Najib Abdul Razak is under fire for its huge debts which are partly government-guaranteed.
The currency slide means that 1MDB “would incur an unrealised foreign exchange loss of RM4 billion, exerting more pressure on the fund to meet its debt obligations if the ringgit stays depressed” the Edge Financial Daily reported.
It said that although a substantial amount of its assets are held in US dollars, 1MDB’s assets do not generate enough cash flow to cover its liabilities.
1MDB’s finance costs were already an astounding RM2.4 billion, resulting to a cash flow deficit of RM2.3 billion in financial year 2014, the daily reported, and that was when the ringgit was averaging between 3 and 3.20 against the US dollar.
“Because of that, the sovereign fund, which posted a nett loss of RM665.3 million for FY14, has kept issuing debt papers to raise fresh capital to meet its debt obligations and fund asset acquisitions.”
It said that at best, 1MDB could sell its US dollar assets worth RM12.9 billion to pay its foreign debts.
Already, it said, 1MDB’s latest financial accounts shows it sold almost half of its US$5.3 billion (RM18.4 billion) assets to meet debt obligations and fund working capital.
The investment fund has received severe flak from the opposition who question its financial trail stretching from Putrajaya to tax haven Cayman Islands.
Among others, the opposition cried foul over 1MDB’s move of revaluing prime land it bought from the government at knock-down price to show on paper profits.
However, 1MDB has always maintained that all its deals are legitimate.
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