Wait… Malaysia Still Has Billions In 1MDB Debt To Pay Until 2039? Here’s Why

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A decade after the world’s largest kleptocracy scandal first shocked global financial markets, the cost of 1MDB is still hitting the Malaysian government.

On Thursday, Deputy Finance Minister Liew Chin Tong stood before the Dewan Rakyat and delivered a reality check: Malaysia will have to shoulder the remaining liabilities of the defunct state fund, 1Malaysia Development Bhd (1MDB), because the low-hanging fruit of asset recovery has effectively dried up.

A government-guaranteed Islamic medium term note (IMTN) – comprising RM5 billion in principal and RM3.9 billion in interest – remains outstanding on the books.

This means that while 1MDB’s masterminds are either behind bars, fleeing international warrants or facing court cases, a multi-billion ringgit debt will remain actively serviced by Putrajaya until it finally matures in the year 2039.

What Does The Ledger Look Like?

To understand the financial weight the government is inheriting, one has to look at the massive gap between what was stolen, what was recovered, and what it actually costs to carry debt over decades.

According to the Ministry of Finance, the total lifetime obligation born from the 1MDB disaster stands at a staggering RM51.4 billion.

As of late June 2026, the government has successfully paid off RM42.5 billion of that debt. However, “successful” asset recoveries from global bank settlements and asset seizures only totalled RM31.3 billion.

The reason asset recoveries (RM31.3 billion) didn’t cancel out the paid-off debts (RM42.5 billion) comes down to compounding interest, legal fees, and operational costs.

Recovering the stolen principal does not absolve the state from paying the heavy interest accumulated over the last 15 years.

Who is the Government Paying?

The outstanding RM8.9 billion is owed to institutional bondholders holding the 30-year Islamic Medium Term Note (IMTN) Sukuk issued way back in May 2009.

These bondholders are conservative institutional entities, including domestic pension funds like the Employees Provident Fund (EPF), local commercial banks, and international asset managers.

When they purchased these long-term instruments back in 2009, they were essentially lending money to the state under the ironclad assumption that it was a risk-free investment.

Why Putrajaya Cannot Simply Walk Away

If 1MDB is a defunct corporate shell built on fraud, why doesn’t our government simply default on the remaining RM8.9 billion?

The short answer lies in the unconditional Government Guarantee (GG) stamped onto those bonds in 2009. Legally, the Ministry of Finance is the ultimate guarantor. If the state walks away from 1MDB’s debt, it walks away from its own sovereign word.

A default would trigger a downgrade of Malaysia’s sovereign credit rating by international agencies like Moody’s and S&P.

Such a move would skyrocket borrowing costs for all future national projects, trigger capital flight, weaken the Ringgit, and severely damage Malaysia’s global economic credibility just as it is successfully rebuilding investor confidence.

The Government Is Still Trying To Recoup Some Of The Losses

The government isn’t surrendering the remaining RM20.1 billion shortfall lying down. Putrajaya has initiated an aggressive wave of legal actions globally to recoup what it can, targeting the facilitators who allegedly allowed the capital flight to happen.

The Ministry of Finance has filed lawsuits against major global financial institutions, including Deutsche Bank AG and Standard Chartered plc, alongside corporate management firm Amicorp and international law firm White & Case.

Simultaneously, civil and criminal proceedings continue against high-profile individuals, ranging from the fugitive financier Jho Low to Datin Seri Rosmah Mansor, the wife of former Prime Minister Najib Razak.

Yet, as Deputy Minister Liew cautioned Parliament, there is “no certainty of success” in these foreign jurisdictions and protracted court battles. Chasing assets through complex, cross-border litigation takes years, and the probability of recouping the full RM20.1 billion is statistically low.

What effect does all of this mean for us, the rakyat?

One word: opportunity cost. A ringgit funnelled into paying the 1MDB debt is a ringgit taken away from spending on upgrading public healthcare, infrastructure, schools, or cutting the national deficit.

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