Malaysian Parliament Investigation Of State Fund On Hold

KUALA LUMPUR (Reuters) - A Malaysian parliamentary investigation into a graft scandal at debt-laden state investment fund 1MDB has been put on hold as cracks in the long-ruling party appeared to widen on Wednesday.

The allegations of extensive graft at the fund are the biggest threat to Prime Minister Najib Razak's credibility since he took office in 2009, and could threaten the grip his United Malays National Organisation (UMNO) party has kept on politics since independence in 1957.

Najib sacked his deputy on Tuesday after he called on Najib publicly to explain the situation around 1Malaysia Development Bhd (1MDB), which has debts of more than $11 billion and is being investigated for financial mismanagement and graft.

The man overseeing the parliamentary investigation into 1MDB, Public Accounts Committee (PAC) chairman Nur Jazalan, was appointed a new deputy home minister on Tuesday and said in a statement he therefore would resign from his committee post.

"All proceedings that had been arranged for August, including 1MDB will be halted until the new PAC line-up is announced at the next Dewan Rakyat sitting," he said, according to media.

PAC was scheduled to question several senior 1MDB executives and others whose names have been linked to the scandal in August.

Parliament will choose new members for the committee in a session in October. Members of the PAC are not allowed to hold any position in the cabinet.

Najib has denied taking any money for personal gain, saying the corruption allegations are part of a malicious campaign to force him from office. 1MDB has denied transferring funds to Najib and an interim government report has found nothing suspicious.

Meanwhile, sacked deputy prime minister Muhyiddin Yassin was due to hold a news conference on Wednesday amid speculation opposition to Najib within the ruling UMNO would coalesce around him.

Muhyiddin promised to answer all questions related to his ouster from the cabinet at the news conference at his Kuala Lumpur home.

Several UMNO party leaders were reported to have visited Muhyiddin at his residence on Tuesday after he was dropped from the cabinet.

Muhyiddin warned on the weekend that Barisan Nasional, the ruling coalition led by UMNO, would lose power if it did not do a better job of explaining the scandal to the public.

Najib responded in a televised statement on Tuesday by saying cabinet ministers airing differences in the open could turn public opinion against the government.

Muhyiddin said later he accepted Najib's decision with an open heart, while maintaining his view on 1MDB.

Muhyiddin had been a frequent critic of Najib, who was already under pressure from influential former prime minister Mahathir Mohamad, who has called for him to step down.