MOF confirms Bank Negara, Khazanah funds used to pay 1MDB debts

Finance Minister Lim Guan Eng has confirmed reports that Bank Negara and Khazanah funds were used to service 1MDB's debts to the International Petroleum Investment Co (IPIC).

In a press conference in Putrajaya today, Lim said there were two such transactions, namely:

• The redemption of redeemable cumulative convertible preference shares (RCCPS) by Khazanah worth RM1.199 billion; and
• Sale of Kuala Lumpur land to Bank Negara for RM2.066 billion.

Lim revealed that the piece of land was strategically located adjacent to Sasana Kijang last year.

"On December 14, 2017, the Finance Ministry (MOF) via its indirectly wholly owned company, Hartanah Mampan Sdn Bhd (HMSB) entered into a sale and purchase agreement with Bank Negara to sell the piece of land," he said.

The Wall Street Journal and Reuters have quoted sources in reporting today that Najib Abdul Razak's administration used money raised from a deal with Khazanah to pay for some of the liabilities of state fund 1MDB.

Lim believed that both Khazanah and Bank Negara were under pressure to make these payments.

"There was all sorts of pressure, otherwise I do not think they would have made these payments. Of course they were covering themselves saying there were letters of authorisation.

"You are looking at the treasury officers who knew their heads would be on the chopping board without the written authorisation. (So,) they have the necessary written authorisation," he said.

"But, I think you are right to say they are subjected to all sorts of pressure," Lim added.

To a question on whether the Bank Negara governor and top management of Khazanah should be held responsible, he said everyone should be held accountable.

"Of course, if they were instructed to take certain action, I am sure they have some justification. But, I think this is something we have to evaluate," the minister said.

Khazanah told Reuters in an e-mail that the ministry exercised its right in August 2017 to redeem outstanding Redeemable Convertible Cumulative Preference Shares amounting to RM1.2 billion, which were issued to the ministry in 2011.

However, it did not comment on whether the funds were used for repaying 1MDB’s dues.

Meanwhile, Bank Negara explained its land transaction was for the development of a financial education hub complied with all governance requirements and relevant laws that govern it. - Mkini