What is the projected additional cost to repay 1MDB bonds due to ringgit depreciation?

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Additional RM7.7 Billion Cost Projected for 1MDB Bond Repayments Due to Ringgit Weakness

Malaysia faces a potential additional expenditure of RM7.7 billion for the repayment of the principal on US$6.5 billion (RM29.5 billion) in 1Malaysia Development Bhd (1MDB) bonds. This projected increase in cost is a direct consequence of the Malaysian ringgit's continued depreciation against the US dollar, which has reached a 24-year low.
Increased Principal Repayment Amount

The US$6.5 billion in 1MDB bonds, issued in 2012 and 2013, are scheduled to mature in 2022 and 2023. When these bonds were initially issued, the exchange rate was approximately RM3.35 to the US dollar, making the principal amount equivalent to about RM21.8 billion. However, with the ringgit's current exchange rate at RM4.54 against the US dollar, the principal repayment for the same US$6.5 billion now amounts to RM29.5 billion. This widening gap represents an additional RM7.7 billion that the federal government will need to allocate for the principal repayment alone.
Impact of Ringgit's 24-Year Low

The ringgit's slide to RM4.54 per US dollar marks a significant economic development, reflecting a 24-year low against the greenback. This depreciation not only affects the principal repayment of foreign-denominated debt like the 1MDB bonds but also has broader implications for the national economy. The increased cost of servicing foreign debt can strain government finances and contribute to higher inflation.
Bond Issuance Details and Maturities

The US$6.5 billion in 1MDB bonds were structured in tranches: US$1.75 billion issued in 2012 with a 5.75 per cent annual interest rate, another US$1.75 billion in 2012 at 5.99 per cent annually, and a final US$3 billion in 2013 with a 4.4 per cent annual interest rate. These bonds are now coming due during a period of significant US dollar strength, exacerbating the impact of the depreciating ringgit on repayment costs.
Cumulative Interest Costs Affected

Beyond the principal, the weaker ringgit also inflates the annual interest payments. While the cumulative interest over the past decade has already exceeded RM10.5 billion, a weaker ringgit this year means the annual interest expenditure is estimated to be around RM1.5 billion, an increase from the approximately RM1 billion it would have been at a stronger exchange rate. This further compounds the financial burden associated with the 1MDB debt.

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What is the projected additional cost to repay 1MDB bonds due to ringgit depreciation?

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