Minister: Nation's exposure in BMF scandal bigger than 1MDB

The government's exposure through 1MDB involved only the paid-up capital, which meant that the BMF scandal in the 1980s during the Mahathir-administration is worse, said Communications and Multimedia Minister Salleh Keruak said.

In view of this, Salleh said a Royal Commission of Inquiry should be held on the BMF scandal and Bank Negara's losses in the forex market in the early 1990s.

The BMF scandal was estimated to have cost the federal government RM2.5 billion in the 1980s while the Bank Negara suffered around RM30 billion in losses after gambling on the foreign exchange market in the 1990s.

"The government's real exposure in 1MDB is only RM1 million, the initial paid-up capital. Mahathir, however, is creating the impression that the government lost RM42 billion, which is not true and is a fabrication.

"In the case of the BMF and Bank Negara forex scandals, though, the losses were real and substantial, involving massive capital injections and bailouts to avoid bankruptcy.

"While the finances of 1MDB is an open book, until today we do not know the truth regarding the finances related to the BMF and Bank Negara forex scandals. That is why the need for a RCI on these two matters," he said in a statement.

Government guarantees

Discussion over the BMF and Bank Negara's forex losses were revived after a recently declassified Central Intelligence Agency (CIA) report was picked up by the media.

Salleh said that his views did not consider the government guarantees for loans taken by 1MDB. According to Moody's, Putrajaya's explicit government guarantees amounted to RM5.8 billion or 0.5 percent of GDP.

"Indeed, the contingent risks associated with 1MDB's non-guaranteed liabilities may be as high or even higher than the government's actual explicitly guaranteed exposures," the ratings agency said last April.

1MDB's overall debt, according to published data dating back to 2014 is RM42 billion, the New Straits Times reported last year.

This does not include 1MDB's progress in paring off debt by selling its assets.

Last December, Financial Times reported that China might assist 1MDB to pay off what was owed to Abu Dhabi's state-owned International Petroleum Investment Company amounting to US$6.5 billion.

Three sources close to the deal told Financial Times that China's assistance would likely come in the form of an assets for financing swap.-Mkini