Maybank: 1MDB debt costs may reach RM34.6bil

PETALING JAYA: Malaysia’s cost of servicing the 1Malaysia Development Bhd (1MDB) debt may reach as much as RM34.6bil (US$8.6bil) from 2019 to 2023, as the Government would probably fully account for it, according to Maybank Kim Eng Securities.

The full crystallisation of 1MDB’s debt has become highly likely, analysts Winson Phoon and Se Tho Mun Yi wrote in a report yesterday.

Debt service, both coupon and principal repayment, has been estimated at RM1.7bil in 2019, RM1.7bil in 2020, RM2.7bil in 2021, RM15.4bil in 2022 and RM13.1bil in 2023.

Other options include buying back US-dollar bonds such as 1MDB Global Investment bonds trading at 89% of par from the open market, which is cheaper than redeeming the notes upon maturity date at par.

Gross issuance of government and state-guaranteed bonds may decline to RM136bil this year from RM146bil in 2017, due to a review of infrastructure projects.

Sales will probably total RM127bil in 2019 and RM126bil in 2020.

There is unlikely to be any supply risk for government bonds this year, as the Finance Ministry has said that it is on track to meet the fiscal deficit target of 2.8% of gross domestic product.

The outlook is less certain for 2019, as the government may budget for expenditure on infrastructure that was previously funded by contingent liabilities, as well as obligations accruing under 1MDB and public-private partnerships, widening the budget deficit.