MP SPEAKS | The RM2 billion federal government guarantee for Penang's reported RM2 billion Asian Development Bank (ADB) loan for the state's LRT project is small compared to allocations previously received by the state.

Penang previously received back three percent in allocations from its yearly RM7 billion tax payments to the federal government. Instead of RM2 billion in direct allocations however, this is merely a loan guarantee with no risk to the federal government. This is also when the Penang government has a proven track record of not defaulting on its debt obligations.

Further, Penang’s sterling financial performance since 2008 is proven by having the lowest debts amongst all states in the country of RM58 million. This is compared to states that owe the federal government more than RM3 billion and even default on loan repayments.

Why is the federal government willing to...