News
Former Deputy Finance Minister urges CB Governor to go
A senior Government minister on Saturday repeated his call for the Central Bank Governor to resign, a day after the Supreme Court was urged to rule on an independent inquiry into the controversial Central Bank Treasury bond, amidst growing concern over the slow progress of a current investigation.
Former Deputy Finance Minister in the Mahinda Rajapaksa administration, Sarath Amunugama, who was appointed Minister of Higher Education last week, said the Central Bank has lost its credibility over the recent events.
“I stated then (a few weeks ago) and I continue to state (now) that the Governor (Arjuna Mahendran) should resign as the Bank has lost its credibility,” he told the Sunday Times when asked whether his views have changed after being inducted into the Cabinet with several other SLFP colleagues.
He said in the world of finance, perception and credibility are huge issues and these have been dented by the recent events as there is a perception that a fraud has taken place at the banking regulator.
On Friday, three Sri Lankan good governance activists filed a fundamental rights petition in the Supreme Court on Friday urging an independent inquiry into the bond issue.
It was filed by Dr. G. Usvatte-Aratchi (economist and former UN official), Dr. A.C. Visvalingam (engineering consultant and former member of the Public Service Commission) and Chandra Jayaratne (chartered accountant and former Chairman, Ceylon Chamber of Commerce) seeking an order from court directing the Monetary Board of the Bank “to carry out an independent inquiry by a competent panel of professionals well versed in the rules, systems, procedures and processes applicable to the public debt management under the supervision of court”.
The petitioners urged court to direct the Monetary Board and other associated respondents, in consultation with stakeholders, to formulate new systems, processes, rules and regulatory frameworks which assure transparency and best good governance practices are in place in respect of future public debt issuance.
In a March 12 letter to the President, a similar request for a panel of professionals was made by Mr. Jayaratne saying civil society was disappointed by the announcement of a committee of UNP-affiliated lawyers to investigate the bond issue. The three petitioners are also members of a civil society rights group called the Friday Forum.
Meanwhile the Government-appointed committee led by senior lawyer Gamini Pitipana this week received many documents from the Central Bank connected with their investigations, and at the same time the committee members are questioning officials of the bank. While the committee members have declined to speak to the media, sources close to the committee said technical issues are being clarified through the services of experts.
The sources said the committee is expected to complete its work and submit a report within the one month period assigned to its fact-finding mission. It was appointed on March 12.
However Dr. Amunugama said the probe should have been faster and the report released much quicker. The longer it takes, there are more doubts in the minds of the public, he added.
The February 27 bond issue raised eyebrows and subsequently severe criticism after the Central Bank accepted offers up to Rs. 10 billion at higher-than-usual interest rates from an auction in which the advertised amount was Rs.1 billion.
The respondents cited in the petition include the Monetary Board, currently-on-leave Governor Mahendran, Deputy Governor and Treasury Bond Tender Committee Chairman P. Samarasiri, the Ministry of Policy Planning and Economic Affairs Secretary, Perpetual Treasuries Ltd and Arjun Aloysius (from the same firm). Aloysius is also Mr. Mahendran’s son-in-law, which relationship has also been stated in the FR petition. Perpetual Treasuries, owned by the Aloysius family, was given 50 per cent of the Rs. 10 billion in bonds accepted, raising suspicions of insider dealing.
The petition stated that the February 27 transaction “is steeped in serious irregularities, lack of transparency and adherence to accepted best practices of good governance and possibly tainted by conflicts of interests and related party transactions…”
It said the transaction will result in a significant increase in the cost of borrowing for the Government and result in the public being forced to pay higher interest rates on all forms of borrowing, including housing loans, short and long term bank and finance company loans as well as consumption loans and pawning linked loans causing an undue burden on people.
“The Petitioners further verily believe that there will be an increase in finance costs of business, commerce and trading and once these costs are passed on to consumers through price increases in the supply of goods and services, the average household expenses, already strained by inflation, will add to the burdens borne by the people/citizens of the Republic.”
It said the increase in interest rates will result in primary dealers, banks and other holders of bonds incurring significant market to market losses on their holdings and even threaten the solvency and viability of some of the primary dealers.