KUALA LUMPUR (Aug 11): The govt has never defaulted on its debt obligations even though it took over Lembaga Tabung Haji’s (TH) non-performing assets to help ease the pilgrim fund’s financial woes, Finance Minister II Datuk Seri Amir Hamzah Azizan assured the Dewan Rakyat on Tuesday.

“The government has never failed to settle its debts. Malaysian Government Securities and Treasury bills issued by the government have always been paid,” said the senator. “We have always paid and will continue to pay. That is the government’s guarantee.”

Amir was responding, during the winding-up of the special parliamentary debate on the Royal Commission of Inquiry (RCI) report on TH, to several MPs who questioned whether the refinancing of RM11.5 billion in sukuk issued by Urusharta Jamaah Sdn Bhd (UJSB) was to delay the government’s redemption obligation to 2036.

UJSB was a special purpose vehicle set up by the Ministry of Finance in 2018 to take over RM10 billion worth underperforming assets from TH. In return, TH received RM300 million cash and two tranches of sukuk — Series 1 worth RM10 billion, and Series 2 worth RM9.6 billion due May 2029.

The Series 1 sukuk matured about two months ago on May 29 with a redemption value of about RM12.5 billion. UJSB did not redeem the debt paper, it opted to refinance RM11.5 billion through the issue of 10-year Series 3 sukuk maturing in May 2036 to TH. The remaining RM965 million was settled via a parcel of land in Tun Razak Exchange and a plantation in Sarawak. 

The new sukuk carries a fixed annual coupon of 3.825%, providing TH with about RM440 million in cash each year, Amir said. 

He highlighted that the refinancing should not be viewed solely as an "extension of UJSB’s obligation" because the new structure addresses one of TH’s main financial weaknesses identified by the RCI, which noted the pilgrim fund's reliance on accrued accounting income that was not supported by annual cash payments.

The refinancing exercise is expected to help improve TH’s liquidity by converting an accrued accounting return into an annual cash flow that can be reinvested or used to support its operations and hibah distributions. Nevertheless, Amir said the refinancing does not eliminate the underlying RM11.5 billion obligation. It replaces the matured Series 1 paper with a new debt instrument due in another 10 years.

Furthermore, he noted that if the government had not bailed out TH, Malaysia would have faced a “much bigger problem”. 

“The government fulfilled its responsibility as provided under the Tabung Haji Act. For every financing undertaken by the government, the government has always complied with the conditions imposed,” he told the parliament. 

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