Fifty years after the Employees Provident Fund (EPF) was created, a retired senior government official – who was in service at the time the Fund was launched -- believes the Central Bank (CB) has efficiently managed the Fund which stands at Rs.560.4 billion rupees as at 2007, equivalent to 25% of the GDP. It was first started to ensure employers all over the world also contributed something towards the employees basic social benefits which would mature later on. Countries like Singapore and Malaysia also started funds around the same time as Sri Lanka. The former official said interest rates all over the world during that time were relatively stable at around 2 or 3%. Interest rates of 5% were considered high.
"There was a push in our region," the official recalled. Increasing the number of employees contributes to growth by keeping inflation down and providing employment. When it was started in Singapore by former Prime Minister Lee Kwan Yew, the concept was sold to employees by saying employers would make the contribution that is also given by the employee who will get the money upon retirement. Since inflation was low at that time, it was real money which would not depreciate over time.
Initially, the EPF was supposed to be handled by an independent board but, as the former official said, it is much easier to talk about setting one up than actually doing it. The private sector, which was growing, decided to latch it onto the CB due to its stellar reputation and the high integrity and capability of the people working at the CB.
Very recently, a policy was being touted by the CB on having an independent institution which would set up a board to handle the EPF but the trade unions slammed the idea and insisted it be managed by the CB. That itself is a testament to the confidence that account members have in the CB to manage the EPF. However, he said that ideally, the EPF should be run independently with no outside influence and interference.