Malaysia's Prime Minister Najib Razak inspects the United Malays National Organisation (Umno) youth during the annual assembly at the Putra World Trade Centre in Kuala Lumpur.

Reuters/Kuala Lumpur

Malaysia's embattled Prime Minister Najib Razak defiantly vowed on Thursday he "will not surrender" to critics who have assailed him over a festering funding scandal, and said his government's economic stewardship was not to blame for a sliding currency.

Addressing the annual meeting of his long-ruling United Malays National Organisation (Umno), Najib appealed for unity after a fractious week in which the party's deputy leader has called for him to stand aside.

Najib's government has been buffeted by allegations of graft and mismanagement at state fund 1Malaysia Development Berhad (1MDB), and the revelation that more than $600mn was deposited in his own bank account in what he says was a political donation.

"What's important is that I am on the side of right, and the truth will prevail," said the prime minister, who was interviewed by Malaysia's Anti-Corruption Commission (MACC) at the weekend.

Switching briefly into English during a 90-minute Malay-language speech that drew frequent shouts of support and bursts of applause from his audience, the British-educated Najib declared: "I am a gentleman!"

The Wall Street Journal said in July that 2.6bn ringgit ($610.8mn) had been discovered in Najib's personal accounts by investigators probing accusations of financial irregularities at 1MDB.

Najib, who chairs 1MDB's advisory board, has denied the money came from 1MDB, which is being investigated by Malaysian and foreign agencies.

The MACC has backed Najib's explanation that the money came from an unidentified donor in the Middle East.

The scandals have shaken investors in Southeast Asia's third-biggest economy and rocked public confidence in the coalition led by Umno, which has held power since independence in 1957 but looks vulnerable at the next election in 2018.

Currency fall

The uncertainty created has also hit an economy reeling from falling oil and gas prices, with the ringgit losing nearly a quarter of its value against the dollar this year.

"The fall in the currency, which has caused much worry, is not due to our failure in managing the economy but was caused by external factors, among them the fall in oil prices and other commodities," said Najib.

Najib also defended the introduction in April of an unpopular sales tax on goods and services (GST), saying without it Malaysia's fiscal deficit could swell to 4.8% next year, rather than the 3.1% the government is targeting, due to an expected fall in revenues of 30bn ringgit due to lower energy prices.

"In this context, it is unimaginable if the government had not had the political bravery to implement the GST," he said.

Analysts say Najib retains the support of most of the nearly 200 powerful division chiefs who sit at the apex of Umno's 3.5mn-member organisation, making it unlikely he can be unseated as party president and prime minister.

But he has been wounded by attacks from influential former prime minister Mahathir Mohamad, who says the party will lose the next election if Najib remains, and Umno deputy president Muhyiddin Yassin.

In a speech to his supporters on Monday night, Muhyiddin, who was sacked as deputy prime minister in August but remains party No.2, called on Najib to "go on leave" until the investigations were completed.

Responding to his critics, Najib said the August reshuffle had been necessary for maintaining government unity.

"Even if one day the baton of leadership will be passed on to someone else ... I can't just abandon our cause and drop our mission," he said.

"Even though there will be those who turn away, even though we are pushed to fall, there shall be no retreat, no surrender. No retreat! No surrender!"