No decision on withdrawal of US$500 million sovereign guarantee loan

30 Nov 2020 / 18:04 H.

KUALA LUMPUR: The government has not made any decision on the withdrawal of the US$500 million (RM2.037b) sovereign guarantee loan from the Asian Development Bank (ADB) for the Penang government, Finance Minister Senator Tengku Zafrul Tengku Abdul Aziz told the Dewan Rakyat today.

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

He said the federal government did not withdraw the guarantee as there is currently none.

He however added it does not mean that the project was scrapped.

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

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

He said there were three options - direct loan to state govt 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.”

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

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