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Lim Guan Eng: Depreciating Ringgit will cost government additional RM7.7 billion to repay 1MDB debts

While the Ringgit’s value continues to depreciate against the US Dollar, the government may have to fork out an additional RM7.7 billion to repay the 1Malaysia Development Bhd’s (1MDB) arranged by Goldman Sachs.

The matter was highlighted by former Finance Minister Lim Guan Eng in a Facebook post as he pointed out that the US$6.5 billion bonds issued in 2012 and 2013 are due in 2022 and 2023 respectively.

“At RM3.35 to the US dollar when the bonds were issued, the principal amount of US$6.5 billion would come up to about RM21.8 billion.”

“At the current exchange rate of RM4.54 to the US dollar, the principal amount due for the US$6.5 billion bonds would be RM29.5 billion. That is RM7.7 billion more,” he said.

In addition, Lim also pointed out that the cumulative interest for the bonds would have amounted to over RM1 billion a year and RM10.5 billion in the past decade.

“A weaker ringgit this year means that the annual interest cost is around RM1.5 billion instead of RM1 billion,” Lim said.

Lim also questioned why the UMNO leaders and Prime Minister Ismail Sabri Yaakob had kept silent on these huge billion ringgit losses due to the depreciating ringgit.

Apart from the depreciation against the USD, Lim said the Ringgit had also dipped to a historic low of RM3.26 against the Singapore dollar recently, while the Indonesian rupiah has appreciated by more than 4% against the Ringgit this year.

He then called for the government to adopt structural economic reforms to stop the Ringgit from its rapid decline. He also warned of the adverse repercussions on inflation to businesses, cost of living, and government debt denominated in US dollars.

Last week, the Ringgit hit a 24-year-low against the US Dollar after it pass the RM4.50 mark. Unfortunately, analysts are expecting that the Ringgit will see a further decline against the greenback on the country’s lack of catalysts and ahead of the US central bank decision on interest rates.

According to Bernama, analysts pointed out that the rising inflation worries, including in emerging-market (EM) economies, had led to investors holding off on their buying interest in EM assets and would remain focused on safe-haven assets such as the US dollar.

“The ringgit needs a fresh boost to attract buying interest from investors. But now, we think investors may take a wait-and-see approach for the ringgit until Budget 2023 is announced,” the analyst said.

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