Finance Minister Lim Guan Eng yesterday detailed how the new Malaysia government discovered that federal debt reached RM1 trillion (S$337 billion), a sum disputed by ousted premier Najib Razak.

Datuk Seri Najib wrote in a Facebook post on Wednesday that foreign investors and ratings agencies would be unsettled without details of how government debts could jump to 65 per cent of gross domestic product, when his previous Barisan Nasional government tallied them at 50.9 per cent.

"There must be a clear distinction between political narrative and facts. Mixing them will create doubts on the credibility of our numbers and the professionalism of the institutions that were involved in preparing them, governed by Malaysians laws and international standards," he wrote.

"As a result of these alarming and confusing statements, our Bursa Malaysia index fell the most among all worldwide stock markets, resulting in tens of billions of ringgit in market value wiped out in one day.

"Our Bursa index fell 40.78 points today (Wednesday), or 2.21 per cent, while the Indonesian stock index added 0.71 per cent."

Giving the breakdown, Mr Lim said in a statement that the official debt stands at RM686.8 billion, or 50.8 per cent of GDP.

But added to this are government guarantees for entities unable to service their debts amounting to RM199.1 billion, a sum that includes RM38 billion owed by 1Malaysia Development Berhad (1MDB). This would take the total federal government debt to RM885.9 billion, or 65.4 per cent of the economy.

Mr Lim also pointed out that another RM201.4 billion was committed to "lease payments" for projects such as the building of schools, roads, police stations and hospitals.

"(They) were designed specifically to circumvent the federal government guarantee and debt limits," he said.

This takes the total government liability to RM1.0873 trillion, or 80.3 per cent of the economy as of the end of last year.

Mr Lim said: "The decision to tell the truth may unnerve Najib, but we firmly believe that by recognising our true debt situation today, it will enable the federal government to take concrete action to regularise and strengthen our financial state.

"This administration puts the interests of the people first and hence, it is necessary to bite the bullet now, work hard to solve our problems, rather than let it explode in our faces in the future."

He added an assurance: "The financial sector is stable, the banking sector is well capitalised and there is sufficient liquidity in the market."

Meanwhile, Mr Lim said that RM3.2 billion of public assets was bought by Malaysia's central bank and sovereign wealth fund to help pay debts owed by 1MDB last year, a "bailout" by the previous government that was discovered by the new Pakatan Harapan government.

He said the Najib administration redeemed shares in wealth fund Khazanah worth RM1.2 billion, a sum equivalent to a payment made last August on behalf of 1MDB.

Mr Lim said that on Dec 14 last year, Bank Negara Malaysia bought a piece of land from the Ministry of Finance worth RM2 billion - this sum made up the bulk of a RM2.4 billion payment on behalf of 1MDB.

"1MDB was already insolvent in 2016. If you look at payments made by the federal government, it is clear that it was a bailout," he said.

However, he did not provide details of how it was determined that the funds received by the Finance Ministry were used directly to pay off 1MDB's obligations.