The dispute between 1MDB and International Petroleum Investment Corporation (IPIC) could lead to a change in government, said a ratings agency.

American ratings agency Standard and Poor’s is of the view that possible implications of the 1MDB dispute for the country’s political stability could be of more relevance.

“Prime Minister Najib (Abdul) Razak is closely linked to the company and strong pressures have mounted on him to step down.

“Although Najib appears to have consolidated power for now, a disorderly change in the government cannot be ruled out and policy consistency could also be negatively affected,” said the ratings agency in its credit FAQ published yesterday.

The dispute between 1MDB and IPIC, however, does not constitute a sovereign default.

S&P’s global ratings credit analyst, Christian Esters, said the ratings agency’s sovereign ratings had referred to the sovereign’s ability and willingness to service financial obligations to non-official creditors.

“Consequently, we do not consider a contractual dispute and termination of a bilateral agreement between governments or their entities as sovereign default,” Esters was quoted as saying by the Financial Times.

Meanwhile, the ratings agency said that it did “not expect 1MDB to represent a large contingent liability to the government”.

“We think that the government is reluctant to extend its support for debt beyond the level that it has explicitly guaranteed or extended in the letter of support (RM17.6 billion or 1.4 percent of GDP).

“We do not consider these amounts to be material to the government’s balance sheet. Still, implications for the country’s political stability could be more pressing.”