Govt’s RM88b Deposit Guarantee at Risk If Tabung Haji Restructuring Fails, RCI Report Warns

KUALA LUMPUR, July 30 — The federal government’s RM88 billion deposit guarantee for Lembaga Tabung Haji (TH) would be activated should the pilgrimage board fail to execute its 2018 Recovery and Restructuring Plan, according to the Royal Commission of Inquiry (RCI) report released yesterday.

Investigating TH’s management and operational issues spanning from 2014 to 2020, the RCI emphasized that the government must give serious consideration to the recovery blueprint to safeguard both the pilgrimage board’s objectives and national financial stability.

The RCI warned that an operational failure at TH would activate the government’s statutory guarantee under Section 24 of Act 535, directly threatening the country’s fiscal standing.

“If LTH fails, the government’s guarantee (section 24 of Act 535) to depositors, which is currently worth RM88 billion, will have to be activated,” the report stated. “In such circumstances, not only will TH bear the consequences but the government’s fiscal position will also be affected, and this will risk the country’s fiscal systemic stability.”

The commission found that TH was exposed to significant strategic risks within the national financial ecosystem. It cautioned that unresolved systemic issues at TH could trigger a broader national financial crisis, jeopardize investor confidence, and undermine Malaysia’s economic growth alongside the board’s capacity to perform its core functions.

The report noted that urgent intervention was required within a tight timeframe to restore TH’s financial standing before the end of the 2018 financial year, adding that sukuk instruments could be enhanced through government guarantees.

To evaluate and oversee the recovery framework, a special committee comprising representatives from the Prime Minister’s Office, Bank Negara Malaysia, the Ministry of Finance, and TH senior management was established to formulate an effective plan anchored on four main pillars.

According to the RCI, the restructuring plan was designed to protect the interests of nearly 9.3 million depositors at the time and guarantee the continuity of TH’s primary mandate in Hajj management. Additionally, the plan sought to restore the fund’s capacity to distribute profit distributions (hibah) in full compliance with Act 535 while mitigating fiscal risks to maintain economic stability.

-NMT