THE loan Malaysia has requested of Japan is to restructure and replace government debts that are denominated in US dollars, said Finance Minister Lim Guan Eng.

“If and once it is confirmed it will be used to restructure and replace certain debts that were denominated in US dollars,” Lim told The Malaysian Insight.  

“It should be like and like, where foreign debt is substituted with foreign debt.”

During his trip to Japan on June 12, Prime Minister Dr Mahathir Mohamad had asked for yen credit in the form of a soft loan during a meeting with Japanese Prime Minister Shinzo Abe on June 12.

The loan will be used to help reduce some of Malaysia’s “too high” borrowing costs from loans taken by the previous Barisan Nasional administration, Dr Mahathir had said.

 Dr Mahathir had cited as example a loan taken by the Najib administration which had a 6% interest rate but a 10% commission.

“When we pay 10% as a commission for a RM100 million loan, we only get RM90 million. But we still have to pay interest for RM100 million. This results in an interest rate of 7% to 7.5%.

“This causes the cost of borrowing to be too high. If we can reduce the cost by borrowing from a source with lower rates, we can retire the old loan,” the prime minister had said.

Lim said Dr Mahathir chose to ask for yen credit because the currency was more stable and the government could secure better rates.

However, Lim said it was far too early to discuss what foreign borrowings the government will use the yen loan to settle.

“We are still waiting for confirmation. It is too early to talk about the loans we will substitute it with.”  

Between 2012 and 2013, the BN government paid US$600 million (RM2.3 billion) in fees and commission to Goldman Sachs to arrange three bonds amounting to US$6.5 billion for 1Malaysia Development Bhd.

The Pakatan Harapan government is considering asking the US Department of Justice to help recover the commission paid to Goldman Sachs. – June 24, 2018.