Malaysia 1MDB Update: Central Bank Gives State-Run Fund ‘Reasonable Time’ To Pay Fine

The central bank of Malaysia said Friday it will give debt-ridden state fund 1Malaysia Development Berhad time to bring back the $1.83 billion it owes. The 1MDB fund, set up by Malaysian Prime Minister Najib Razak, has been burdened with debt of over $12 million over the years and faces allegations of mismanagement and corruption.

Bank Negara Malaysia's newly appointed Gov. Muhammad Ibrahim said at a news conference that the fund needed to restructure its debts so the bank decided not to impose a deadline on it. The 1MDB fund was previously given a May 30 deadline to pay the fine for failing to bring back the money it had stored abroad.

“Let’s give them reasonable time. When it comes to debt restructuring and rescheduling, it involves a lot of parties and negotiation, settlements will take some time depending on the complexity of the situation,” Muhammad said, without mentioning a time frame.

Last month, Muhammad’s predecessor Zeti Akhtar Aziz said that the central bank had warned the Malaysian government about risks associated with 1MDB. Bank Negara Malaysia had issued two directives to the finance ministry, the only shareholder of 1MDB, informing it about the fund’s growing debt, Zeti said.

“Of course this was on our radar screens,” Zeti said, referring to the scandal-plagued fund. “We were monitoring in terms of the level of their indebtedness, and whether they had any systemic implications on the banking sector.”

Separately, 1MDB said last month it is in default to pay a $50.3 million interest on a $1.75 billion bond issue amid an ongoing problem with Abu Dhabi's state-run fund International Petroleum Investment Company. The Malaysian fund also said that the missed interest payment resulted in a cross-default on its 5 billion ringgit ($1.28 billion) sukuk (Islamic bond) due in 2039 and a 2.4 billion ringgit sukuk due between 2021 and 2024.