No decision yet on ADB loan withdrawal

THE government has yet to decide whether to withdraw from the US$500 million (RM2.037 billion) sovereign guarantee loan from the Asian Development Bank (ADB), Finance Minister Senator Tengku Zafrul Tengku Abdul Aziz told the Dewan Rakyat yesterday.

He said the loan application was made by the Penang government to partly finance its RM9.5 billion light rail transit (LRT) project.

The federal government did not withdraw the guarantee as there is currently none, he said, adding that it does not mean the project was scrapped.

“The matter will be discussed with the Economic Planning Unit. Financing is important as the project is very costly.”

Zafrul said the government had received an application from the Penang government on Jan 25 last year to fund the rail project.

He said there were three options – direct loan to the state government with sovereign guarantee, direct loan to the federal government and loan to a special purpose vehicle with sovereign guarantee.

He said the discussions by the previous Pakatan Harapan government on July 17 last year and ADB was to carry out due diligence, followed by a letter from then finance minister Lim Guan Eng stating that there was no objection to it.

He said the letter has no legal obligation and is not legally-binding.

“It was decided on July 19 last year that the state government could not apply for a loan without prior approval from the federal government,” Zafrul said.

The federal government has yet to receive the due diligence report from ADB.