Monetary Board says EPF opting for DDO in best interest of members

• Says current balances of EPF members will not be reduced and Fund will be able to distribute at minimum 9% per annum return

The Monetary Board yesterday declared that opting for the DDO was in the best interest of the members of the EPF based on the two options available, given that a large share of its assets is invested in Treasury bonds.

In a statement, the Monetary Board said it envisaged that of the two options, Debt Exchange (as opposed to Non-Exchange) is distinctly the better option considering the assessments made on the basis of several prudent and realistic assumptions. Further, the Monetary Board was of the view that with the proposed Debt Exchange and the other reforms being implemented by the Government, the sustainability of public finance will be restored with its ability to service its debt. 

The Monetary Board was also cognizant that unless debt sustainability is restored without undue delay, there is a high risk of the Government not being in a position to fully service obligations on the pre-exchange bonds held by the EPF leading to very serious adverse consequences to the EPF.

 “Hence, opting for the DDO was in the best interest of the members of EPF based on the two options available, given that a large share of the EPF’s assets is invested in Treasury bonds,” the statement said. The face value of the Treasury bonds portfolio of the EPF is Rs. 3.2 trillion. 

“It is also important to note that after the participation in DDO, current balances of EPF members will not be reduced and the Fund will be able to distribute at minimum 9% per annum return to members in the foreseeable future,” the statement added.

The Monetary Board of the CBSL as the custodian of the EPF, having considered the two options decided to opt for the Debt Exchange offer with a long-term view in the best interest of the members of the Fund. 

“Accordingly, the EPF tendered Rs. 2,667,512,169,237 face value of Treasury bonds for Debt Exchange, including an additional Rs. 149,890,740,000 in excess of the minimum participation requirement considering its comparative benefits to the Fund. The Government has accepted the same and issued new Treasury bonds to EPF with an equivalent face value,” the statement said.