[UPDATED] ‘There’s never been govt guarantee on Penang LRT loan’

KUALA LUMPUR – The government has not withdrawn Penang’s application for a loan from the Asian Development Bank (ADB) for the state’s LRT project, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz told the Dewan Rakyat today.

Zafrul said if the Penang government still wants to continue the RM2 billion loan, it must be provided in the annual budget and rolling plan of the 12th Malaysia Plan, and the loan must also be submitted to the Economic Planning Unit.

“The Finance Ministry’s decision at that time was made because we see it is not in line with the stand of Bank Negara, because the country’s financial market has high liquidity and the state government can finance it through the local market and not necessarily through ADB,” he said.

Zafrul said this while answering a supplementary question from Lim Guan Eng (PH-Bagan), who asked the government to consider allowing Penang to continue its loan with ADB.

He then clarified that there had never been a government guarantee on Penang’s LRT loan.

“Hence, I did not withdraw any (government) guarantee," Zafrul said.

Zafrul said the government needed to review the loan as the lending rate offered by ADB was higher than that offered by Malaysian Government Securities (MGS).

“ADB’s lending rate for a 10-year period is 3.81% compared to MGS’ 2.72%," he said.

He added that there was no issue of the federal government neglecting Penang’s development because the Finance Ministry had not received a due diligence report from ADB regarding the loan.

Zafrul said although Lim had issued a “no-barrier” letter to ADB to implement a due diligence process, the cabinet meeting on July 19 last year had however agreed that the state government could not make loans, involving government guarantees without the federal government’s approval.

“Any new approval involving the government should not exceed the statutory debt ceiling," he said.

Last Wednesday, Zafrul said in a parliamentary reply to Chow Kon Yeow (PH-Tanjong) that any new loan with government guarantee should be scrutinised as best as possible because it would increase the government contingent liability.

Zafrul said the Finance Ministry received a letter from ADB dated January 25, 209 regarding Penang’s loan application.

“In line with a review on the country’s GDP projections and the government’s focus on economic recovery post-Covid-19, the Finance Ministry has decided to not continue with the ADB loan amounting to US$500 million (RM2 billion) to finance the RM9.5 billion Penang LRT project.”

Lim in his statement yesterday had urged the government to reconsider the decision on “cancelling the ADB loan guarantee”, claiming the government was practising “revenge politics”. – The Vibes, November 30, 2020