Looming $70m 1MDB interest payment is key test for Malaysia

Full settlement by PH govt may set dangerous precedent, but not paying carries other financial risks

Former Malaysian prime minister Najib Razak at the Kuala Lumpur High Court in August. The claims in the US Department of Justice lawsuit have become grounds for the new government to pursue charges of criminal breach of trust against Najib and his as
Since the surprise poll victory in May, Prime Minister Mahathir Mohamad's new government has moved quickly to honour its electoral pledge to review flawed contract awards related to 1Malaysia Development Berhad and to pursue the alleged perpetrators involved in siphoning out large sums of money from the failed state investment fund. ST FILE PHOTO
Former Malaysian prime minister Najib Razak at the Kuala Lumpur High Court in August. The claims in the US Department of Justice lawsuit have become grounds for the new government to pursue charges of criminal breach of trust against Najib and his as
Former Malaysian prime minister Najib Razak at the Kuala Lumpur High Court in August. The claims in the US Department of Justice lawsuit have become grounds for the new government to pursue charges of criminal breach of trust against Najib and his associates. PHOTO: EPA-EFE
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A milestone interest payment for a huge debt owed to Abu Dhabi due in the middle of this month is presenting Prime Minister Mahathir Mohamad's new government with its most serious economic challenge yet, as it struggles with the aftershocks from the 1Malaysia Development Berhad (1MDB) scandal.

The interest charge of US$50.3 million (S$70 million) represents the first financial commitment that the Pakatan Harapan (PH) coalition government must honour over the 1MDB affair since coming to power after the May general election.

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A version of this article appeared in the print edition of The Sunday Times on October 07, 2018, with the headline Looming $70m 1MDB interest payment is key test for Malaysia. Subscribe