KUALA LUMPUR - SRC International owes state pension fund Kumpulan Wang Persaraan (KWAP) a debt of RM4.15 billion (S$1.36 billion) as of May this year, which the Malaysian government has to pay up, the Kuala Lumpur High Court heard on Wednesday (June 19) at the corruption trial of former prime minister Najib Razak.

Najib is facing seven charges tied to criminal breach of trust, money laundering and abuse of power involving SRC International, a former subsidiary of state fund 1Malaysia Development Berhad (1MDB), and how its funds were transferred into his private bank accounts.

Malay Mail news portal reported the Finance Ministry's Strategic Investment Department deputy secretary Afidah Azwa Abdul Aziz as saying on Wednesday that the amount consisted of the remaining principal payment and outstanding interest payments.

"Until now, the federal government continues to help pay the loan debts of SRC International to KWAP, and payment will continue until the principal amount and existing interests is paid in full," she said.

Ms Afidah Azwa said the loan repayment period will last until 2022, 10 years from the date the loan was given out based on an agreement between SRC and KWAP, the civil service pension fund.

She said that in 2015, the federal government had to approve a RM642 million loan to KWAP, when SRC could not pay its debt to the pension fund, Free Malaysia Today online news quoted her as telling the court.

Ms Afidah Azwa that said if the emergency loan was not issued, the government which stood as guarantor for the RM4 billion loan taken must settle the principal amount within 30 days due to a loan default under the agreement.

Last week, the court heard about RM2 billion of the KWAP moiney was channelled to a secret bank account, and about a fugitive former SRC chief executive wanted by the authorities.

This followed eye-popping witness testimony last month that KWAP released RM4 billion in cash - its biggest-ever loan - to SRC after getting two letters of guarantee for the funds.

One letter was signed by Najib, who was also finance minister at the time. The other was signed by then Second Finance Minister Ahmad Husni Hanadzlah.

In late May, former KWAP chief executive Azian Mohd Noh had testified that a total of RM4 billion in loans were released to SRC in August 2011 and March 2012, although its application failed to meet KWAP's investment policy requirements.

KWAP, which has a fund size of RM141 billion, had in 2016 defended its decision to lend the RM4 billion to SRC, as the loan was guaranteed by the Malaysian government.

Then opposition MPs had raised questions in Parliament over the status of SRC's investment after it was reported that the funds were used to buy coal mines in Mongolia.