Tun Dr Mahathir Mohamad did some sums as he questioned the government's wisdom in allowing 1Malaysia Development Berhad (1MDB) to take a loan that, he calculated, costs almost RM1 million (S$361,000) in interest repayment a day.
Putrajaya should never have guaranteed 1MDB's RM5 billion loan that came with an unusually high interest rate and paid Goldman Sachs a 10 per cent commission, he said.
"What this means is that of the RM5 billion borrowed 1MDB would get only RM4.5 billion… But 1MDB would pay 5.9 per cent interest on the whole of RM5 billion. Since it gets only RM4.5 billion the rate of interest on this amount would be 6.6 per cent plus," he wrote on his personal blog yesterday.
Loans taken or guaranteed by the government normally charge interest of 3 per cent or less, he noted.
This means the interest repayment for the 1MDB loan translates into about RM350 million a year or almost RM1 million a day.
"Who approved such terrible terms for a loan to a government owned company?" he asked.
With 1MDB now RM42 billion in debt, the interest "must come to almost RM3 billion a year" - a burden that would "sink" the state investment company if the returns are not favourable.
Dr Mahathir also noted how the Finance Ministry-owned 1MDB had trouble making loan repayments on two occasions.
"Somebody needs to answer for this stupidity. Or is it abuse of authority?" he said.
The former premier, who has been waging a campaign to get Prime Minister Najib Razak to step down, added: "1MDB is effectively headed by the Prime Minister who is also the Minister of Finance. When loans of more than RM100 million are raised for investment overseas, Bank Negara has to approve. But the final approval must come from the Minister responsible. And the Minister responsible is also the effective head of 1MDB."
Dr Mahathir also claimed in his blog that it was Malaysian businessman Low Taek Jho who advised Mr Najib that the government should guarantee 1MDB's RM5 billion loan.
Mr Low, better known as Jho Low, has repeatedly denied any involvement with 1MDB.
Last night, the Prime Minister accused Dr Mahathir of using the 1MDB issue as an excuse to attack him. Writing on his blog, Datuk Seri Najib said that if Dr Mahathir was genuinely interested in getting answers, he should wait until the three separate probes into 1MDB are completed.
Saying that his harshest critic has no interest in the answers, Mr Najib added: "(He) is just using the company as an excuse to try and topple a serving Prime Minister. If 1MDB had never existed, Tun would find another reason."
Yesterday, prominent banker Nazir Razak took aim at the government's slowness in auditing 1MDB's accounts for 2015.
"I am perplexed why your March 2015 audit has not even started? How is this allowed?" Datuk Seri Nazir, who is chairman of the CIMB group and also Mr Najib's younger brother, wrote on his Instagram account.
Deloitte Malaysia told the parliamentary Public Accounts Committee on Wednesday that it had yet to receive instructions from the Finance Ministry to audit 1MDB's accounts.
This article was first published on June 13, 2015.
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