KUALA LUMPUR (July 23): To pay down 1MDB debts held in the US dollar or ringgit, the government will employ soft loans from Japan, Prime Minister Tun Dr Mahathir Mohamad told Parliament today.

He said that taking advantage of comparative exchange rates, the move would allow Malaysia to reduce the cost of repaying the debt, and associated interest of 6% annually, reported the Malay Mail

“The Japanese yen is lower than the ringgit. One yen is US$0.01, whereas RM1 is US$0.25. The low value of yen does not mean a cheaper loan,” he said.

Dr Mahathir also explained that the loans in yen will be converted to US dollar or ringgit where applicable, and be used to pay off the existing 1MDB debt.

The PM also hoped that the Japanese government would give similar interest rates, about 0.7% as in the past, and a reasonable repayment period, reported The Edge Markets.

“Malaysia once took a soft loan from Japan with 0.7% interest rate with a 40-year repayment period. We are not sure if the Japanese government can give the same rate as before but if we get a lower interest rate (loan), we won’t be burdened by a high debt that has an interest rate of more than 6% the original loan.

“They (Japan) are already considering it and we don't know how much, and what is the rate. We are already talking with the Japanese (government) and it is not easy for them to give soft loan to anybody, they have their own government to satisfy,” said Dr Mahathir.

The comments by Dr Mahathir were in response to a question of why the government was seeking loans in the Japanese yen, raised today by opposition leader Datuk Seri Ahmad Zahid Hamidi. 

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