Set ceiling on debt guarantees, says A-G

KUALA LUMPUR: The government should set a ceiling on its debt guarantees by taking into account its financial standings, says Auditor-General Datuk Nik Azman Nik Abdul Majid.

This came amid concerns over the ability of five Ministry of Finance Incorporated (MoF Inc) subsidiaries to meet their debt obligations.

The five subsidiaries are Kuala Lumpur International Airport Bhd, GovCo Holdings Bhd, Asset Global Network Sdn Bhd, Jambatan Kedua Sdn Bhd and DanaInfra Nasional Bhd.Citing Section 8 of the Loans Guarantee (Bodies Corporate) Act, Nik Azman said it stated that companies had the obligation to repay the advances from the government.

“However, the ability of these five companies to repay the advances cannot be ascertained, ” he said after giving a briefing to the Public Accounts Committee (PAC) on the financial statements of the 2018 Auditor-General’s Report.

The report noted that the Loans Guarantee Act and Financial Procedure Act empowers the government to provide guarantees to loans by MoF Inc subsidiaries.

As at Dec 31 last year, the balance loan guaranteed by the government to 27 companies, approved by the Cabinet, stood at RM201.898bil.

The loans were obtained by the companies and comprised funding through the issuance of bonds, sukuk and loans from financial institutions.

“The government has identified 13 out of the 27 companies with loans totalling RM137.7bil.

Important information: Nik Azman (right) and Noraini holding a copy of the 2018 Auditor-General’s Report at the Parliament building in Kuala Lumpur. — BernamaImportant information: Nik Azman (right) and Noraini holding a copy of the 2018 Auditor-General’s Report at the Parliament building in Kuala Lumpur. — Bernama

“The government guarantee on the loans by the five companies is RM76.075bil and it was approved by the previous administration.

“As at Dec 31 last year, the loan’s balance stands at RM66.341bil, which will mature in 2041, except for one at close to RM100mil, which is due this year, ” said the report.

PAC chairman Datuk Dr Noraini Ahmad said the government had approved a loan worth RM2.839bil as an advance for debt payment for the five MoF Inc subsidiaries for the purposes of loan repayment.

“If the debt repayment maturity for all these entities falls within the same period, then it is a concern. We hope the government will look into this, ” she said.

She also noted that the government debt last year stood at RM741.049bil while its other financial commitments amounted to RM280.171bil.

“This brings the total debt and government’s financial commitments to RM1.021 trillion, ” Noraini said.

The report stated that the government was forced to approve a loan of RM2.839bil as an advance for debt payment in order to prevent a cross default.

Of the amount, RM1.753bil was paid by the previous administration, while the remaining RM1.086bil was paid by the current government.

The report said some of it went into paying debt service charges accrued by subsidiaries of 1Malaysia Development Bhd.

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