Even US$3 billion not enough to settle 1MDB case, says finance minister

Finance Minister Tengku Zafrul Aziz says the government will await the outcome of its suit against the international banking firm.

KUALA LUMPUR: Malaysia’s new government would not be willing to accept even US$3 billion (RM12.8 billion) in compensation from Goldman Sachs to settle a case over the 1MDB scandal, according to the finance minister, ruling out a figure that is far higher than the bank offered last year.

Malaysia has taken legal action against Goldman Sachs and 17 current and former directors of its units for allegedly misleading investors over bond sales totalling US$6.5 billion that the US bank helped raise for sovereign wealth fund 1Malaysia Development Bhd.

Finance Minister Tengku Zafrul Aziz, who joined the three-month-old government from the corporate world, said he had held a conversation with Goldman Sachs representatives last month.

“We are continuing our pursuit to get some money from GS. And the legal case is still ongoing, so we will have to wait for the outcome of that,” the minister said in an interview in his office in Kuala Lumpur on Saturday.

“If it’s US$2 billion, I can say, no. US$3 billion, no,” he added. “As long as the amount is not something we think we can accept, then we continue with the legal case.”

He declined to say what an acceptable sum would be.

A Goldman Sachs spokesman did not immediately respond to an email seeking comment.

Former Prime Minister Dr Mahathir Mohamad said in December that Goldman Sachs had offered “one point something billion” dollars for an out-of-court settlement over its role in the 1MDB scandal.

According to the US Justice Department, Goldman Sachs earned US$600 million in fees for its work with 1MDB.

Malaysia’s fiscal deficit to rise to 6% of GDP

Malaysia aims to borrow its way out of an economic slump brought on by the coronavirus pandemic, and the finance minister told Reuters it will nearly double its fiscal deficit this year while keeping open the option of raising the public debt ceiling.

Tengku Zafrul said the fiscal deficit would rise to around 6% of annual economic output this year because of the stimulus, and that a direct fiscal injection of RM10 billion announced on Friday would be raised through domestic borrowing.

“There is only so much monetary policy can do,” Tengku Zafrul said in the interview in his office. “So you need fiscal policy to come into play, as long as you have the discipline and the commitment in the longer term to go back to where you should be in terms of the deficit.”

Tengku Zafrul said the goal was to narrow the fiscal deficit back down to less than 4% of GDP over the next three years or so. It was 3.2% last year.

“How bad was it during the (global financial crisis)? It was 6.7%. So we have room if we want to borrow,” he said, referring to the country’s peak annual deficit in 2009.

Tengku Zafrul said Malaysia’s outstanding public debt now stands at 52% of GDP but that “if we need to, then we should increase the ceiling” beyond the current 55% “to help the people and the economy”.

He declined to say how high the government might seek to raise the ceiling, a move that would require approval from parliament.

Tengku Zafrul said there was no immediate need for the central bank to cut its benchmark interest rate further from its decade low of 2%, “given the liquidity in the country and given where the currency is going and where we are as an economy”.

Bank Negara Malaysia’s monetary policy committee next meets on July 7.

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