Dr M concedes World Bank loans taken under his watch

Former Prime Minister Dr Mahathir Mohamad has admitted that Malaysia did borrow from the World Bank during his administration, but insisted that he never wrote to the global financial institution for money.

In a blog posting answering claims made by Opposition Leader Anwar Ibrahim, Mahathir said no letter or verbal request was made by him to the World Bank.

“If Anwar can show evidence that I did, he should. Failing that he should swear on the Quran in a mosque that he knows what he says is true. I am prepared to swear that I never asked for loans from the World Bank,” he said.

Mahathir, who had taken over as finance minister after Anwar's sacking and imprisonment in 1998, said that Malaysia refused to take World Bank or International Monetary Fund loans as the “so-called help would worsen the situation”.

Anwar, he said, had advocated for pro-IMF policies which found opposition even within Bank Negara Malaysia.

“(Anwar) raised interest rates, reduced the period for declaring loans non-performing from six months to three months, reduced budget allocation to ministries so as to achieve a budget surplus, etc.

“Although he did not oppose currency controls, his appointees as governor and deputy governor of Bank Negara refused to implement the policy and resigned,” Mahathir recalled.

Loans not completely drawn down

He added that while Malaysia had obtained loans from the World Bank since 1958, it stopped drawing down several loans by 1998.

Mahathir said that for Malaysia, the last negotiations for the education sector, social sector and technical sectors loans were made in 1997.

“Naturally, the loans were not approved until 1999 when the crisis was over. The usual sequence is for application for a loan to be made, followed by negotiations.

“Malaysia stopped the draw down on loans negotiated with the World Bank in 1997 and June 1998. This did not stop Malaysia from recovering from the crisis,” he said.

Mahathir added that a loan for US$300 million was signed with the World Bank in June 1998, when Anwar was still finance minister for a food, higher education and microcredit programme.

Another US$100 million was also signed for technical assistance in March 1999, he added, but only US$11.94 million was drawn down.

A US$60 million social sector loan was stopped after US$60,000 was drawn down, while an education loan was stopped before the total US$244 million was taken out, he added.

Both were approved in March 1999 after Anwar was sacked as finance minister.

In responding Anwar's claim, Mahathir had earlier said that he refused to take up any loans from the global institution to avoid “enslavement” of the country.

In response, PKR produced World Bank documents which showed that some of the loans were prepared for by the Economic Planning Unit in October 1998, when Anwar was already in jail.