SINGAPORE -- The Malaysian government under Prime Minister Mahathir Mohamad has revealed that the national debt is far higher than figures published by the previous administration, topping 1 trillion ringgit ($251 billion).
The larger debt figure, which was officially 686.8 billion ringgit at the end of 2017, has led to speculation that former Prime Minister Najib Razak's government altered records to hide the extent of corruption. The revelation has shaken investor trust and the fiscal turmoil could scare foreign money away.
"Certain 'red' files were accessible only to certain parties, which impeded officials and auditors from carrying out their responsibilities," newly appointed Finance Minister Lim Guan Eng said on Tuesday.
"It is clear that the previous government" deceived the public over hot-button issues such as the 1Malaysia Development Berhad state fund, he said, "and even misrepresented the financial situation to Parliament."
The market response has been muted, given the limited detail that has come to light. But further revelations could spur foreign players to flee, weakening the ringgit and hampering Malaysian stocks.
The new administration also revealed that Najib's government funneled about 7 billion ringgit into 1MDB, the state fund at the heart of a corruption scandal that led to Najib's downfall in this month's election. The former prime minister had claimed 1MDB was paying its own interest with money saved from streamlining operations, but evidence suggests otherwise.
The state fund is regarded as just the tip of the iceberg, as Mahathir's administration works to uncover any and all illicit activities conducted under Najib's government. Najib, who denies allegations that he misappropriated money from 1MDB, was questioned Tuesday by Malaysia's anti-corruption commission but has yet to be charged.
The corruption scandal also may limit Mahathir's options in tackling the country's problems. Mahathir's Alliance of Hope coalition pledged during the campaign to scrap the nation's consumption tax, eliminate highway tolls and revive a fuel subsidy.
Market players warn that these plans could weaken government coffers. When Mahathir went through with the tax cut, in effect eliminating almost 20% of the government's income, Moody's Investors Service said the move was "credit negative." Further moves that could expand the budget deficit likely will draw even greater scrutiny.
Mahathir said Wednesday he will cut the salaries of cabinet members by 10% to help reduce the national debt, but this move represents only a drop in the ocean. The prime minister also will examine whether infrastructure projects in the works, such as the Kuala Lumpur-Singapore high-speed railway and the East Coast Rail Link, can be scrapped or renegotiated.
Malaysia's debt stood at 54% of gross domestic product based on the 686.8 billion ringgit figure, the International Monetary Fund said, already higher than that of many Southeast Asian neighbors -- such as Indonesia at 29% or Thailand's 42%. The new debt total of 1 trillion ringgit only compounds the problem.