By Joseph Sipalan and Rozanna Latiff
KUALA LUMPUR (Reuters) - Malaysia's embattled Prime Minister Najib Razak vowed on Thursday he "will not surrender" to critics who say he should quit over a festering funding scandal, and said his government's economic stewardship was not to blame for a sliding currency.
Addressing an 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) [TERRN.UL], and the revelation that more than $600 million was deposited in his 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 on the weekend.
Switching into English during a 90-minute Malay-language speech that drew frequent shouts of support and applause from his audience, the British-educated Najib declared: "I am a gentleman!"
The Wall Street Journal said in July that 2.6 billion ringgit ($610.8 million) had been discovered in Najib's personal accounts by investigators looking into 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 unidentified donors in the Middle East.
The scandals have rocked public confidence in the coalition led by UMNO, which has held power since independence in 1957 but has seen its support slip to all-time lows.
In a country where ethnicity and religion are highly sensitive, Najib sought to shore up support among ethnic Malay Muslims who form the bedrock of UMNO support - and to reach out to the Islamist PAS party that recently split from its opposition alliance with a mainly ethnic Chinese party.
"If UMNO is rejected, this country will be ruled by those who are against the Islamic struggle," he said. "Disaster will befall us."
His appeal did little to placate him most vocal critic, influential former Prime Minister Mahathir Mohamad, who has said UNMO will lose the next election in 2018 if Najib remains.
"We want to save UMNO, which is why we ask Najib to step down because so long as he is in charge, UMNO is not safe," Mahathir, 90, said in Kuala Lumpur.
The uncertainty has hit an economy reeling from falling oil and gas revenues, with the ringgit losing nearly a quarter against the dollar this year.
"The fall ... 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 a sales tax on goods and services (GST), saying without it the fiscal deficit could swell to 4.8 percent next year, rather than a 3.1 percent target.
Analysts say Najib retains the support of most of the nearly 200 division chiefs who sit at the apex of UMNO's 3.5 million-member organization, making it unlikely he can be unseated as party president and prime minister.
But he has been wounded by attacks from Mahathir and UMNO Deputy President Muhyiddin Yassin.
In a speech to his supporters on Monday, Muhyiddin, who was sacked as deputy prime minister in August but remains deputy party leader, called on Najib to "go on leave" until investigations were completed.
Najib said the August reshuffle had been necessary for maintaining government unity.
"Even though there will be those who turn away, even though we are pushed to fall, there shall be no retreat, no surrender," he said. "No retreat! No surrender!"
(Reporting by Joseph Sipalan and Rozanna Latiff; Writing by Alex Richardson; Editing by Praveen Menon and Robert Birsel)