FILE - Construction workers stand in front of a 1Malaysia Development Berhad (1MDB) billboard at the Tun Razak Exchange development in Kuala Lumpur, Malaysia.
FILE - Construction workers stand in front of a 1Malaysia Development Berhad (1MDB) billboard at the Tun Razak Exchange development in Kuala Lumpur, Malaysia.

BANGKOK - Former Malaysian Prime Minister Mahathir Mohamad warned Thursday the country faces bankruptcy because of an ongoing scandal with the state-owned 1MDB fund.

“The government will have financial deficits which may lead to bankruptcy if the (1MDB) loans are not serviced and the principal paid,” Mahathir stated in an online article and social media posts.

The former prime minister said any defaults by the government-owned company would affect Malaysia’s credit worthiness “and the government may not be able to borrow any more in the market.” 

Mahathir, prime minister between 1981 and 2003, also renewed his personal criticism of current prime minister Najib Razak, embroiled in the scandal and facing scrutiny over the source of nearly $700 million that ended up in a personal, secret bank account through companies linked to the 1MDB sovereign wealth fund, which was initiated by Najib six year ago.

“None of his explanation can be believed” about the money being a gift from the late King of Saudi Arabia, said Mahathir.

In this Monday, Jan. 25, 2016 photo, Malaysian Pri
FILE - Malaysian Prime Minister Najib Razak speaks at a conference in Kuala Lumpur, Malaysia.

Malaysia’s finance ministry, at the recommendation of the public accounts committee, on Wednesday removed the prime minister’s veto power over major decisions by 1MDB and dissolved the fund’s advisory board, but placed final say on appointment of directors and senior management under the finance minister – a portfolio Najib also holds.

“It’s just an academic exercise,” said activist Cynthia Gabriel, the founder of the Kuala Lumpur-based Center to Combat Corruption and Cronyism. “The prime minister should not be the finance minister, as well. It’s a policy that needs to be changed.”

Arul Kanda Kandasamy will remain as 1MDB president to oversee a debt reduction plan and a $4.3 billion dispute with the sovereign wealth fund of Abu Dhabi.

While there is skepticism Malaysian bodies will adequately investigate the financial quagmire, authorities in other jurisdictions, including the FBI in the United States and Switzerland’s attorney general’s office, have recently been more aggressive.

“We are hoping the six different investigating authorities overseas will finally come up with answers to the unanswered questions,” about alleged misappropriations of billions of dollars of Malaysian public funds, Gabriel told VOA. “Something will come to roost very soon. I believe the noose is tightening.”

Najib denies any wrongdoing and has pushed out those in his United Malays National Organizations (UNMO) who have expressed concern or raised questions whether the prime minister can lead the party to victory again in 2018 general elections.

UNMO has run the country since 1957. The party faces a key test in polls Saturday in the largest state of Sarawak, where the Barisan Nasional (BN) coalition, which includes UNMO, is expected to easily win.