The directors of 1MDB have confirmed that the state investment company is "insolvent" and unable to repay debts that could amount to almost US$7 billion over the next five years, said Malaysian Finance Minister Lim Guan Eng.
The company’s former Chief Financial Officer Azmi Tahir wrote to the finance ministry in March, stating that 1MDB wouldn’t be able to service interest payments due in April and May, Lim said in a statement on Wednesday, following meetings with 1MDB’s president, board of directors and other senior officials.
"I have instructed that the Ministry of Finance take steps to appoint PwC to conduct a special position audit and review of 1MDB so that Malaysians would know the true financial state of affairs in 1MDB," Lim said in the statement. "We would then be able to determine the cost of the shenanigans to the taxpayers."
The new revelations come after the finance minister said on Tuesday that Malaysia’s government debt has been inflated by 1MDB’s borrowing and exceeds 1 trillion ringgit ($251 billion). That was higher than previously disclosed by the administration of former Prime Minister Najib Razak, as it was masked by the way the accounts were reported, he said.
Newly-installed Lim instructed the finance ministry’s legal advisers on Wednesday to review Arul Kanda’s position as the president of 1MDB. On Tuesday, he ordered Kanda to clarify whether 1MDB is able to make 143.75 million ringgit of interest payments due May 30. Lim revealed that the ministry has made 6.98 billion ringgit of payments for 1MDB to date, including 5.05 billion ringgit that was part of a settlement with International Petroleum Investment Co., Abu Dhabi’s sovereign wealth fund.
While 1MDB only has a remaining 763 million ringgit of payments to make this year, it must find enough funds to repay 26.8 billion ringgit of debt principal and interest in the following five years.
Lim’s review of 1MDB debt repayments may also place its past settlements at risk. 1MDB said it made a key arbitration payment to IPIC last year for closure on a $1.2 billion deal struck to settle a debt dispute.
Prime Minister Mahathir Mohamad has moved swiftly to tackle corruption related to 1MDB, whose full name is 1Malaysia Development Bhd., ordering the reopening of investigations into the state fund as one of his first steps since taking office two weeks ago.
On Monday, the government announced that a new task force consisting some people involved in a previous probe into 1MDB will lead the renewed investigation. Former Attorney-General Abdul Gani Patail and former anti-graft agency chief commissioner Abu Kassim Mohamed are helming the team along with the police’s former special branch deputy director Abdul Hamid Bador and Mohd Shukri Abdull, chief commissioner of Malaysia’s anti-graft agency.
This task force met for the first time on Tuesday and will focus on bringing back funds and assets, as well as taking criminal action against those involved in wrongdoing in 1MDB under various laws including the penal code.