Prime Minister Datuk Seri Najib Tun Razak said 1Malaysia Development Bhd's (1MDB) debt has been reduced by RM40.4 billion following the signing of some agreements to date.

In his New Year message today, Najib said he was pleased with the progress as he had promised that the debt issue would be resolved by year-end.

"In June, I said that the challenges facing 1MDB would be resolved by the end of the year, and I am pleased to confirm that as of today, the company has already entered into agreements that will see its debts reduced by approximately RM40.4 billion.

"This figure represents the overwhelming majority of 1MDB's debt," he said.

It was reported that 1MDB's debt stood at RM42 billion according to the company's financial audited account as at March 31, 2014.

Meanwhile, the latest agreement was signed between 1MDB and a consortium comprising Iskandar Waterfront Holdings Sdn Bhd (60 per cent) and China Railway Engineering Corporation (40 per cent), for the sale of 60 per cent equity in Bandar Malaysia which resulted in a debt reduction of RM7.1 billion.

"It is therefore clear that 1MDB's major challenges are now behind it, as I promised they would be last summer, and all that remains is for the deals it has entered into to be completed and the final steps of 1MDB's rationalisation programme to complete," he added.

Apart from the sale, 1MDB has also agreed to sell its power generation arm, Edra Global Energy Bhd, to China General Nuclear Power Corp for RM9.83 billion in November.

It also entered into an agreement with Abu Dhabi's International Petroleum Investment Co (IPIC) which would see the latter assume 1MDB's obligation for a US$3.5 billion bond.