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By Ashwin Hemmathagama – Our Lobby Correspondent
Prime Minister Ranil Wickremesinghe yesterday informed Parliament that the Government plans to investigate bond issuances before 2014 that were in the form of direct placements, borrowings made without obtaining Parliamentary approval, and allegations of insider trading at the stock exchange during the Rajapaksa regime.
The Prime Minister, delivering a statement explaining his presence at the Presidential Commission of Inquiry on the controversial Central Bank bond issuance stated that the transparency brought about by the Unity Government would help establish a new political culture in Sri Lanka, which is burdened with debt obtained irresponsibly.
“As per the request of the Bond Commission I went and explained [matters]. In a previous occasion I had mentioned that I was willing to explain any matter to assist the Presidential Commission appointed to investigate the bond issuance. I stated this as my name was mentioned at the Commission, and because the Central Bank is an institute that comes under my Ministry. So, the commission sought explanation on 20 points, and later on, a further 28 points. I have made written submissions for all.
The Commission informed me that they needed some additional clarifications on a few answers I had given. Therefore, I appeared before the Commission on 20 November,” he said, explaining the reasons for his presence before the Commission.
The Prime Minister said that in his appearance he revealed a few facts which never came before the Commission earlier.
“I had to reveal the financial position of the country when we took over in 2015. By 2014 the total foreign debt stood at Rs. 3,113 billion. That is 30% of the Gross Domestic Product. The total debt was 71.3% of the GDP in 2014. Debt servicing cost us 10.4% of the GDP. The economic condition that prevailed in the country was insufficient to pay back the debt, but we had to borrow more for Government expenses,” he said.
To reveal the financial decisions under the former Government, the Prime Minister promised to muster an investigation soon after the Bond Commission comes to an end. “I have obtained details of the bond issuances from 2008 to 2014 from the Central Bank. Every year most of the issuances were direct private placements. There was no transparency. During this period Rs. 5,142 billion worth of bonds were issued out of which Rs. 4,702 billion were private placements. Accordingly, 90% of the bond issuances that took place during this period were private placements, which were 84 in number. Bonds issues by auction was Rs. 435.5 billion,” he added.
According to the Premier, in 2015, bonds were issued only on four occasions using direct private placements for the value of Rs. 157.5 billion. “I have obtained an estimate from the bank on the repayment of capital and interest during 2015 - 2045. So, we will have to pay Rs. 4,154 billion as capital and Rs. 3,086 billion as interest by 2045. But during this period the Government will have to continue borrowing more money issuing bonds. So, the future cost is not estimated. Taking that into consideration we will have to pay a considerable amount of money for debt servicing. The people of this country will have to pay this,” said Wickremesinghe.
“We made an inquiry into the bond issuance in May after taking over the Government in January 2015. We saw that the Monetary Board had not taken any decision to issue bonds using direct private placements. They have decided to meet the Government requirements on short term financial solutions using captive sources. As an example, it was decided to issue bonds via organisations including the Employees Trust Fund, Employees Provident Fund, and the National Savings Bank. I am tabling that decision of the Monetary Board. So, what has happened? It has continued to issue bonds to some preferred primary dealers without a decision from the Monetary Board, without any transparency and deciding interest rates according to personal preferences,” he added.
Drawing lines between serious scams taken place in Sri Lanka, the Prime Minister pledged to develop the economy regardless of the challenges facing the Government. “This is similar to a pyramid scheme and was in use till we took over in 2015. Truly this is the largest pyramid fraud. We will continue to strengthen our economy to pay back these debts and the interest. This debt burden is upon the people of this country. After concluding the investigations of the current Presidential bond commission, we are looking at investigating the great frauds taken place during 2008-2014. In addition, we are looking at bringing to the attention of the Public Finance Committee of Parliament the loans obtained without informing the Parliament and the bonds issues. The great scams in the stock market taken place during this period will also be investigated,” he said.
“We all accept that a transparent system is required instead of a fraudulent system. That is why we decided to launch the auction system. The auction system was used before on several occasions. But our aim was to use it in a more transparent manner. We have obtained international advice on the auction system. An expert from the US treasury is helping us with it. Our Government has already prepared a solid economic development plan. Everybody will benefit from it. The economy was not in a stable condition when we took over in 2015. But we have built some stability to it now. We have proposed development programs in the Budget. We expect to strengthen the economy of the industrial and tourism sector spread over Kandy, Colombo and Hambabtota and to provide more employment opportunities. The local entrepreneurs have more opportunity to make foreign earnings with the GSP+ concessions. The income will increase along with the increase in exports. Therefore, the rate against GDP and debt will decline. So, we will be able to pay this debt,” he added.
Highlighting the importance of the transparency brought about by the Unity Government after January, the Prime Minister said: “We made the bond issuance system more transparent. So, we had a mechanism to check as soon as the charge on bond issuance came up. We appointed the Pitipana Committee. The Pitipana Committee report was tabled in Parliament and was discussed. The same report was submitted to the Attorney General. It was investigated by COPE, which is headed by an Opposition Member of Parliament. The COPE report was also tabled in the Parliament and was submitted to the Attorney General. Without stopping there, we appointed a Presidential Commission. The Government extended the fullest support to the Presidential Commission. Ministers and I gave evidence before this Commission and it was for the first time in the history such an investigation took place. During the Rajapaksa regime, if a similar investigation had been held, the investigators would’ve had to follow the path of Lasantha Wickramathunga. We brought about this transparency.”
“As I always say, the President and I are committed to bringing in this new political culture. This is a new experience for Sri Lanka and not understood by many. Mistakes could happen as it is alien. We should correct them. But we are not ready to sweep the errors and shortfalls under the carpet similar to what happened during Rajapaksa regime,” he added.
