1MDB scandal: Goldman, Malaysia agree on $3.9-billion settlement

Bank to make $2.5-bn cash payment to Malaysia within 10 days, in exchange for having criminal charges dropped

The $3.9-billion 1MDB settlement that Malaysia struck with Goldman Sachs Group provides a timely boost to the government’s coffers just as it faces soaring debt.

The payout equates to nearly one-third of last year’s budget deficit, and 1.07 per cent of 2019 gross domestic product, according to estimates from Bloomberg Economics’ Tamara Mast Henderson. The amount is “quite significant” and could help the government finance its fiscal stimulus program, said Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.

As part of the deal finalised Tuesday, Goldman must make a $2.5-billion cash payment to Malaysia within 10 days in exchange for having its 1MDB-linked criminal charges dropped. The US bank also is guaranteeing the return of $1.4 billion worth 1MDB assets seized by authorities around the world.​

 

​Malaysia’s finance ministry has said the money would be used to pay off the existing debt of 1MDB, a state investment fund, therefore not necessarily affecting the central government’s budget. However, the payout goes a long way in easing the government’s burden as it pushes to raise the debt ceiling to 60 per cent of GDP.

The government is pumping in $70 billion of stimulus measures to boost an economy in its worst slump since the Asian financial crisis more than two decades ago. It expects the budget deficit will widen to 5.8 per cent-6 per cent of GDP this year.