Speaking to journalists on his three-day working visit to Japan, Mahathir said he had brought up the soft loan extended by Japan during his previous tenure as prime minister, with an interest rate of 0.7% repayable over 40 years.
“At that time, Japan’s financial position was very good. But this time, we also asked him to consider providing the yen credit to Malaysia and he agreed to consider.
“The credit that they (Japan) will provide us is to be used for what we promise them. Perhaps we will retire some of the high-cost borrowings that we have and replace them with the yen credit.
“Then the interest rate will be cheaper and we won’t have to bear the interest for many years to come,” he added.
The new government under Mahathir, who was sworn in as the country’s seventh prime minister last month, recently said the federal debt had reached RM1 trillion and that it was looking for ways to lower the debt level.
“If the yen credit is given as a soft loan, it will help us deal with our big debt problem. We do not necessarily have to retire the old loans, but this cheap loan can contribute to the recovery of our debt situation,” Mahathir said.
He added that Malaysia had previously obtained loans at a very high interest rate of up to 6%, and that the people who managed the credit had obtained a commission of up to 10%.
“When we give a commission of 10%, it means that if we take a loan of 100 million in any currency, we get only 90 million, but we still have to repay with interest for 100 million.
“So, if we take 90 million but repay for 100 million, it means the interest increases from 6% to 7% or 7.5%. This makes our cost of borrowing too high.
“If we can reduce that cost by borrowing from other sources with a lower interest rate, we can retire the old loans,” he said.
He said no amount of yen credit had been discussed with Abe.
When asked on reports that the Kuala Lumpur-Singapore High-Speed Rail project had been postponed, not cancelled, he said: “In a way, it is postponed.
“But at the moment, we need to restudy, and if we are short of funds we can delay the implementation of the project or reduce the scope of the project.”