WB considers extra loans to Malaysia worth $2b
WB considers extra loans to Malaysia worth $2b
WASHINGTON (Bloomberg): The World Bank is considering requests from Malaysia for additional loans and may lend the Southeast Asian nation as much as US$2 billion during the next year to 18 months, a senior bank official said Wednesday.
"They are extremely worried that the recession they are undergoing may jeopardize the gains they have made" in wiping out poverty, Jean-Michel Severino, the World Bank's vice president for Asia and the Pacific, told Bloomberg News.
Malaysia -- whose economy grew at an average annual rate of 8 percent for a decade through last year -- is hurtling toward its first recession in 13 years.
The economy, which contracted 1.8 percent in the first quarter, is likely to shrink as much as 2 percent this year, the government estimates.
Like neighboring Indonesia and Thailand, Malaysia is trying to shore up its economy from the ricochet effects of the plunge in Asian currencies and stock markets.
Unlike those two countries and South Korea, Malaysia wants to go it alone without going cap in hand to the International Monetary Fund for a bailout.
The country has been able to avoid that because the government and companies owe less to foreign creditors than those in South Korea, Thailand and Indonesia.
New loans
Still, Malaysia is seeking loans from the World Bank and others.
In June, the bank approved a $300 million loan to supplement government spending on welfare. A month later, Finance Minister Anwar Ibrahim said Malaysia is counting on another $700 million from the Bank this year.
That $700 million loan may be considered by the World Bank board in October, Severino said. If approved, the loan is likely to be disbursed in two payments.
In addition, Malaysia has asked the World Bank to borrow as much as another $1 billion -- made up of investment loans of several hundred million dollars each -- to boost health, education and transport services, Severino said.
Even so, "it's very early in the process," Severino said. "These figures are very uncertain."
Malaysian Prime Minister Mahathir Mohamad, a perennial critic of the IMF, has argued that the conditions the IMF seeks in return for the loans are too tough and lead to a loss of national sovereignty. Higher interest rates that the IMF has urged in other economic trouble spots will force good companies into bankruptcy, Mahathir has said.
While Mahathir has blasted the IMF, he's been careful not to level similar criticism at the World Bank.
Instead of going to the IMF, Mahathir has said Malaysia will seek loans from the bank, as well as Japan, the Asian Development Bank and the Islamic Development Bank to help finance its expected 10 billion ringgit ($2.35 billion) budget deficit this year.