Dr M unsure whether Japan will now give low-interest loan

PARLIAMENT | While Putrajaya is interested in obtaining soft loans from the Japanese government, Prime Minister Dr Mahathir Mohamad is unsure whether Tokyo will provide such low-interest loans.

This because the previous BN administration had previously taken high-interest loans from Japan, resulting in costs that were too high for the government to bear.

“We are trying to get a Japanese loan facility to reduce the high cost of financing, because the loan interest rate for the previous administration was too high – up to six percent – while Goldman Sachs was given a 10 percent commission of the total debt.

“This means the previous government took 90 percent of the debt proceeds, but had to pay the interest on a 100 percent debt,” the Langkawi MP told the Dewan Rakyat during the question-and-answer session this morning.

Mahathir said that in the past, Malaysia had received soft loans from the Japanese government at a 0.7 percent interest rate over a 40-year period.

“We don't know whether the Japan government will now give us such a low interest, but paying back the debt with a lower-interest yen loan means we will not bear a high-interest loan at six percent. Yen debt will replace a US dollar or ringgit-denominated loan.

“We will still bear the debt but the financing cost decreases,” said the prime minister.

Mahathir was responding to parliamentary opposition leader Ahmad Zahid Hamidi (BN-Bagan Datuk), who asked for Putrajaya's justification in borrowing from Tokyo when the yen had higher currency value compare to the ringgit, despite the purportedly lower interest.

When met later at the Parliament lobby, Mahathir said he has no idea how much the loan from his Japanese counterpart will be nor what the loan’s interest rate will be.

"But we expect the rate to be very much lower than the rate that incurred by the previous government," he said.

He also accused the previous administration of using government-linked companies to bypass the debt ceiling. By doing so, he said the companies could borrow much more.

"Today, the government is facing a big loss because 1MDB borrowed RM42 billion. As far as we know, not a single sen has been brought back," he added. - Mkini