No political vendetta in Penang LRT project loan guarantee move, says Finance Minister

KUALA LUMPUR: There was no political vendetta by the Federal Government with regard to the Penang state government's effort to raise some RM2.04bil in loans for its RM9.5bil light rail transit project (LRT).

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz denied claims by several Opposition MPs that the Federal Government had withdrawn its guarantee on the state's loan application with the Asian Development Bank (ADB).

He noted that the Penang state government, the Finance Ministry and ADB had held talks in July last year on the matter and it was decided that ADB was to carry out a prior due diligence report.

"The Finance Ministry and Finance Minister did not receive the due diligence report from ADB.

"As such the issue of the loan guarantee to ADB did not arise, as it was not brought up to the Cabinet for approval to date.

"The claims by Bagan (Lim Guan Eng) that the Federal Government does not care about development in Penang is not true at all," he said when winding up his ministerial reply at the committee stage of debates on Budget 2021 in the Dewan Rakyat on Monday (Nov 30).

Although Lim, who was former finance minister, had issued a letter to ADB for the due diligence report, Zafrul noted it was not a contract which is legally enforceable or binding on the Federal Government.

"Apart from this, the Cabinet on July 19 last year agreed that the state government could not take a loan involving a government guarantee without the approval of the Federal Government to avoid burdening the government's financial standing with debts," he added.

Zafrul also said the Finance Ministry decided not to go ahead with the loan with ADB in line with the views presented by Bank Negara.

He said Bank Negara opined that there was sufficient liquidity in the local market for the loan to be obtained locally.

Besides this, he added that the loan interest rates offered by ADB would have been 40% higher if compared with Malaysian Government Securities (MGS).

"The ADB net lending rate for 10 years is 3.8% compared to the MGS rate of 2.72%," he said.