Malaysian Prime Minister Najib Razak rejected accusations he misappropriated funds as he faces his biggest crisis since coming to power in 2009.
A task force is investigating a money trail that allegedly showed funds ending up in Najib’s bank accounts, a claim he says is political sabotage. “I am not a thief,” Najib told reporters on Sunday. “I am not a traitor and will not betray Malaysians and Malaysia.”
Whether Najib, 61, can withstand the scandal depends in large part on the backing within his own party, given the opposition coalition recently split and is in disarray. Some ministers have publicly voiced support, though his deputy has called for the claims to be probed, and former leader Mahathir Mohamad has urged him for months to stand aside.
The political tensions are denting investor confidence at a time economic growth has slowed. The ringgit on Monday tumbled to its weakest since a dollar peg was scrapped in 2005, hurt also by the impact on emerging markets from fears Greece will exit the euro.
About $700 million may have moved through government agencies, banks and companies linked to a state investment company before apparently appearing in the accounts, the Wall Street Journal reported July 3, citing documents from a government probe. Najib chairs the advisory board of the debt-ridden 1Malaysia Development Bhd.
“The intensification of the domestic political uncertainty may have contributed a bit into the weakness” of the ringgit, said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. The currency is the worst performer in Asia this year, while foreign investors have been net sellers of Malaysian stocks for 10 straight weeks.
Najib’s approval rating fell to 44 percent in January from 48 percent in October, according to a survey conducted by the Merdeka Center for Opinion Research that month. Rising living costs and concern ahead of the introduction of a new consumption tax in April contributed to the decline.
The ruling Barisan Nasional coalition lost the popular vote in the 2013 general elections even as it kept a parliamentary majority. Still, the opposition has struggled to keep momentum ahead of the next election due by 2018, hurt by infighting and the jailing of former leader Anwar Ibrahim for sodomy. Anwar has said the charges against him were politically motivated.
For months Najib has resisted calls from Mahathir to step down over 1MDB, which accumulated debt of 41.9 billion ringgit ($11 billion) in a period of less than five years since it was set up. Mahathir has said that Najib has lost the trust of Malaysians, and their party would lose the next general election if he stays as leader.
The crisis may threaten his ability to implement more economic reforms such as a new consumption tax and fuel subsidy cuts that Fitch Ratings cited when it affirmed Malaysia’s sovereign rating on June 30 and upgraded its outlook to stable.
1MDB on Friday denied it had funneled funds to Najib, rejecting reports that investigators believed they had found such a money trail. The prime minister said he had never taken funds for personal gain and documents on which the Wall Street Journal report is based were doctored.
Home Minister Ahmad Zahid Hamidi said attempts to undermine the government could be a threat to national security.
“Allegations and insinuations are being made against a serving Malaysian prime minister,” he said in a statement Sunday. The ministry and police “will not hesitate to use the full force of the law against those who attempt to harm Malaysia’s economy and our democratic process.”
Defence Minister Hishammuddin Hussein said it’s reckless to criticize Najib as the truth has not been determined.
Attorney-General Abdul Gani Patail said Saturday the task force obtained documents related to the apparent transfer of funds in its probe of 1MDB and during raids on three companies. The task force comprises the Malaysian Anti-Corruption Commission, the central bank and police.
“Following a review and analysis made on documents obtained as a result of the raids, I have given guidance to the Special Task Force to follow up,” Abdul Gani said, without providing details. “The investigation will focus on every aspect raised.”