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.