(May 23): Money used to pay off US$500 million owed by 1MDB to International Petroleum Investment Co (IPIC) PJSC last December came from a land deal involving Bank Negara Malaysia (BNM), The Wall Street Journal (WSJ) has reported.

In a report published today, WSJ reported, "In its final months in office, the government of former Malaysian Prime Minister Najib Razak turned to the nation’s central bank to pay off US$500 million in debt owed by the troubled state investment fund 1Malaysia Development Bhd."

The Malaysian fund had said in December that it raised the money from an “ongoing rationalization program” that involved selling off holdings like power plants and land.

"Instead, the people familiar with the transaction said, the money came from a land deal involving the central bank — raising new questions about the use of state assets to support a fund the US Justice Department says is mired in fraud.

"Najib, who was voted out of office earlier this month, didn’t respond to a request for comment," WSJ reported.

On Jan 5, The Edge Financial Daily reported that BNM bought a 22.5ha piece of land in Kuala Lumpur from the government for RM2 billion to be used primarily for the relocation of its Global Islamic Finance University and the International Shari’ah Research Academy for Islamic Finance.

BNM had said the completion of this transaction was the culmination of several months of discussions with the government.

On Feb 5, The Edge Financial Daily quoted BNM Governor Tan Sri Muhammad Ibrahim as saying that the purchase was "an arm's length deal".

He was quoted as saying: “It was purchased at market value and it was an arm’s length transaction.

“And, to be clear about it, it was not the government that wanted to sell the land to us. We actually approached the government many months ago to buy the land.”

When he was asked to comment on market speculation that the government had used the cash from its sale of the land to BNM to make the payment to IPIC, Muhammad said: “That is the government’s business [on how it uses the proceeds]. It’s best to ask the government, not us. As far as we are concerned, we wanted to buy the land for our own development.”

Moving to quell the speculation, he went on to add: “We are basically the one who requested the government to sell the land to us ...[It was] not the government who wanted to sell the land to us. We had been trying to convince the government for many, many months [to sell us the land], and it so happened that last November or December, the negotiations between us came to fruition, [and] we are quite happy to acquire the land at that price.”

On Dec 27 last year, 1MDB had said that the cash it paid IPIC was from the proceeds of its ongoing rationalisation programme. However, it did not reveal details, such as whether they were assets or investment units that it sold to raise cash for the payment.