Malaysia will still lose tens of billions of ringgit to the 1MDB scandal even after further overseas asset recoveries, its second finance minister said on Wednesday, as disgraced former prime minister Najib Razak prepares to move to house arrest.

Najib has been imprisoned since 2022 following his conviction for corruption and money laundering tied to SRC International, a former subsidiary of 1Malaysia Development Berhad (1MDB). The sovereign wealth fund was co-founded by Najib in 2009 during his time as prime minister. He has consistently maintained his innocence.

“Additional recoveries will not eliminate the losses from 1MDB or bring the losses borne by the country below tens of billions of ringgit,” Amir Hamzah Azizan, Malaysia’s second finance minister, told parliament on Wednesday.

“Repaying the debt to sukuk holders [Islamic bondholders] also does not mean that all expenditure incurred by the government has been recovered.”According to Amir, Putrajaya had already paid 42.5 billion ringgit (US$10.4 billion) of 1MDB’s debts and financial commitments. The government owes another 8.9 billion ringgit in principal and interest on state-guaranteed Islamic bonds maturing in 2039.

Total recoveries currently stand at 31.3 billion ringgit, leaving an estimated net burden of 20.1 billion ringgit unless more money is recovered.

“At this stage, the government cannot state with certainty how much will be recovered from each claim,” Amir said. “The government has not set a definitive year to resolve all claims and asset recovery efforts because this process also depends on court decisions and enforcement at home and abroad.”Founded in 2009, 1MDB was designed to drive economic development and attract foreign direct investment. Instead, it became the centre of one of the world’s biggest financial frauds.

US Department of Justice investigators estimate that at least US$4.5 billion was siphoned from the fund via shell companies and international money-laundering channels. Over US$1 billion allegedly flowed directly into bank accounts linked to Najib, who has argued he was misled about the money’s origin.

Recovery efforts are ongoing across multiple jurisdictions, including the United States, Switzerland, the United Kingdom and Singapore.

On September 18, Malaysia’s king, Sultan Ibrahim Iskandar, granted the 73-year-old a second royal pardon allowing him to serve the remainder of his SRC sentence under house arrest until August 23, 2028, conditional upon settling a 50 million ringgit fine.

Najib’s original 12-year sentence had already been halved in 2024 by the pardons board, which also reduced his fine from 210 million ringgit to 50 million ringgit.

Home Minister Saifuddin Nasution Ismail said on October 18 that Najib remained at Kajang Prison pending payment of the fine and while authorities finalised house-arrest regulations.

Najib’s lawyer, Muhammad Shafee Abdullah, previously said his client had received the conditions governing his house arrest at his Jalan Langgak Duta home in Kuala Lumpur’s upscale Taman Duta neighbourhood, though prison authorities instructed him not to disclose the terms publicly.

Najib’s party, the United Malays National Organisation (Umno), launched a fundraising drive to help pay the fine. Umno president Ahmad Zahid Hamidi reported in late September that 9.25 million ringgit had been raised.

This Week in Asia contacted Umno secretary general Asyraf Wajdi Dusuki regarding the amount collected, but received no response by the time of publication.

The pardon does not affect Najib’s separate 15-year sentence in the main 1MDB trial, which is scheduled to begin in August 2028. The High Court rejected a bid to suspend that sentence on October 14.

The pardon has also divided Prime Minister Anwar Ibrahim’s government, which brings together Umno and the Democratic Action Party (DAP) – a long-standing critic of the former prime minister.

DAP lawmaker Lim Lip Eng challenged the secrecy surrounding the arrangement, declaring on October 16 that “house arrest is not a holiday in a luxury bungalow”.

DAP chief Anthony Loke had already submitted his resignation as transport minister in protest against the pardon, but agreed to stay on until Najib begins house arrest.