KUALA LUMPUR - The Malaysian government has dismissed claims by former premier Najib Razak that the debt-riddled 1MDB was not bailed out with a sum of RM7 billion (S$2.4 billion), with Finance Minister Lim Guan Eng saying on Sunday (May 27) that a further RM5 billion of public funds was in fact allocated to cover the state fund's liabilities.

Mr Lim was responding to Datuk Seri Najib's comments in a Facebook post on Friday that there was no 1MDB bailout by the previous government.

The week-old finance minister called the RM7 billion paid by the Ministry of Finance (MOF) to service 1MDB debt in the past year "as the single largest bailout in history carried out by the government of Malaysia".

He said in a statement that Mr Najib "could not be more wrong" in construing the payments as "compensation" for the transfer of assets to MOF.

The public comments and responses by Mr Lim and Mr Najib are being closely watched by Malaysians, as under the previous government, discussions were not allowed and top officials were sacked or transferred out for looking too deeply into its financials.

The 1Malaysia Development Bhd (1MDB) state fund was started soon after Mr Najib became prime minister in 2009. As Prime Minister, Mr Najib led the state fund's board of advisers until 2016.

The 1MDB scandal is being investigated in at least six countries, with the US Department of Justice alleging that some US$4.5 billion (S$6 billion) were misappropriated.

Under Mr Najib, Malaysia sold some of the 1MDB assets and was paying off its debtors, with the disposal of two prime land banks being the final plank of a rationalisation plan .

Mr Najib had said 1MDB had governance issues but "you cannot just accuse somebody of being a thief or anything unless there is evidence. It's been cleared, there's been no wrongdoing - I stand by it''.

But Mr Lim, who has taken over the job as Finance Minister after the Pakatan Harapan coalition won in the May 9 general election, is looking at 1MDB with a more critical eye as billions of dollars of public funds are involved.

Mr Lim on Sunday, in rebutting Mr Najib, noted that two land parcels were taken back from 1MDB with RM3.2 billion of debt attached.

"Why should the MOF compensate 1MDB to the tune of tens of billions of ringgit as asserted by Datuk Seri Najib Razak, when 1MDB has hardly carried out any development on the land?" he said.

The landbanks in question are the 28ha Tun Razak Exchange (TRX) financial centre in Kuala Lumpur, and a 197ha Bandar Malaysia township just south of the capital, earmarked to host the terminus for the High-Speed Rail to Singapore.

"The former Finance and Prime Minister must not forget that these parcels of land were originally sold by the Government to 1MDB at bargain basement prices between 2010 and 2012," he added in a statement, referring to prices of RM72 to 74 per square foot (psf) or a total of RM1.8 billion.

Mr Najib, who is being investigated in relation to missing funds from 1MDB, had said on Friday that "the arrangement, as I can confirm, is for MOF to service 1MDB debts, but in return for taking over the assets".

"Put another way, had those assets remained in 1MDB, it could have developed and sold the assets on its own, and used the proceeds to pay its debt," he added.

Under Mr Najib's watch, 1MDB sold back plots in TRX to state-controlled entities for huge profits, including a plot to pilgrimage fund Tabung Haji for RM188.5 million and another plot to Affin Bank, controlled by the Malaysian armed forces fund, for RM255 million.

Mr Lim also revealed that the Treasury refunded a RM741 million deposit on behalf of 1MDB after it broke an agreement with a consortium to jointly developed Bandar Malaysia "because 1MDB had used up the deposit for other purposes and did not have the money to refund the deposit".

He added: "Most importantly, the RM6.98 billion paid by MOF on behalf of 1MDB were in relation to borrowings completely unrelated to the above real estate projects", listing out debt related to energy sector investments, an advance from Abu Dhabi's wealth fund International Petroleum Investment Corporation, and a US$3 billion bond to develop TRX which Malaysia's Auditor General said was never used for this purpose.

Mr Lim challenged his predecessor to account for these borrowings, which total RM33 billion.