Malaysia faces bailout question after Abu Dhabi fund terminates debt deal

Kuala Lumpur

THE Malaysian government on Tuesday was facing the prospect of having to bail out the scandal-tainted state fund 1MDB, after a US$4.6 billion debt deal with an Abu Dhabi sovereign fund collapsed this week.

The International Petroleum Investment Company (IPIC) said on Monday that 1Malaysia Development Berhad's (1MDB) had failed to make a US$1.1 billion payment, and so was terminating last June's debt deal. "The government wouldn't want to risk having a default on its books, so if it came down to it, they would want to keep a clean record," said Krystal Tan, a Singapore-based economist at research firm Capital Economics, talking about risk of a bailout for 1MDB.

Any government intervention would pile more pressure on Prime Minister Najib Razak, who founded 1MDB and is on its advisory board. He has faced calls to step down over allegations of graft and misma…