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KUALA LUMPUR: There was no political retaliation by the federal government regarding the Penang state government’s effort to raise about RM2.04bil in loans for its RM9.5bil Light Rail Transit (LRT) project.
Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz denied claims by several opposition MPs that the federal government had withdrawn its guarantee on the state’s loan application with the Asian Development Bank (ADB).
He noted that the Penang state government, the Ministry of Finance and the ADB had held talks in July last year on the matter and it was decided that the ADB would carry out a preliminary due diligence report.
“The Ministry of Finance and the Minister of Finance did not receive the due diligence report from the ADB.
“As such, the issue of the credit guarantee to the ADB did not arise, as it has not been presented to the Cabinet for approval to date.
“Bagan’s (Lim Guan Eng) claims that the federal government does not care about development in Penang are not true at all,” he said at the end of his ministerial response at the stage of the 2021 budget discussion committee at the Dewan Rakyat. on Monday (November 30).
Although Lim, who was finance minister, had sent a letter to the ADB for the due diligence report, Zafrul pointed out that it was not a legally enforceable or binding contract for the federal government.
“Apart from this, the Cabinet on July 19 last year agreed that the state government could not take a government guaranteed loan without the approval of the federal government to avoid overburdening the government’s financial situation with debt,” he added.
Zafrul also said that the Finance Ministry decided not to go ahead with the loan with ADB based on the opinions presented by Bank Negara.
He said that Bank Negara was of the opinion that there was sufficient liquidity in the local market for credit to be obtained locally.
In addition to this, he added that the interest rates of the loans offered by ADB would have been 40% higher compared to the Malaysian Government Securities (MGS).
“ADB’s 10-year net lending rate is 3.8% compared to MGS’s rate of 2.72%,” he said.
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