By P Prem Kumar
KUALA LUMPUR (AA) - A Malaysian debt-ridden state wealth fund that was at the center of impropriety allegations involving the country's prime minister is to be dissolved once it fulfills all financial obligations, a top government official said Wednesday.
Deputy Finance Minister Johari Abdul Ghani told reporters Wednesday that 1Malaysia Development Berhad (1MDB) will not have any active business activity after all assets are transferred to the Minister of Finance -- which holds 100 percent of shares in the fund -- by mid June 2016.
1MDB's 5 billion Ringgit ($1.21 billion) government-guaranteed sukuk matures in 2039, until which 1MDB would remain as a passive firm with no business operations, Ghani said at Parliament Wednesday.
A sukuk is an Islamic financial certificate similar to a bond in Western finance that complies with Islamic religious law.
The embattled fund will also not be allowed to borrow further from local or foreign banking institutions following its unsustainable business model and weak governance, added Ghani -- as highlighted in a recent audit report by the Parliament's Public Accounts Committee.
"1MDB will run-off [liabilities], after which we will close [operations]," Ghani said. "There is no more 1MDB after this."
The embattled state wealth fund has already started to retrench employees en-route to the proposed business closure.
Prime Minister Najib Razak has faced public and private calls for his resignation after allegations that hundreds of millions of dollars were channeled into his bank accounts from 1MDB.
Razak was cleared of the allegations in January, after explaining that the money was a donation from Middle East royals, but the explanation was met with widespread public skepticism.
1MDB was reliant on debt (bank loans, bonds and sukuk) as company capitals, where portions of the debt was government guaranteed or received support letters from the government.
The debt commenced at 5 billion Ringgit in 2009 and rose to 42 billion Ringgit, against assets worth 51 billion Ringgit as of the financial year ended March 31, 2014. During the period, 1MDB paid 2.4 billion Ringgit to service interest on the debt.
1MDB's debt level reached 50 billion Ringgit in January 2016, in contrast to the 53 billion Ringgit in assets. 1MDB spent 3.3 billion Ringgit for payment of interest on the debts between April 1, 2014 to March 31, 2015 (unaudited estimates).
1MDB was incorporated in 2009, after Razak took over the premiership of the country, by transforming a small state fund into a federal agency.