COPE hearings a good first step towards accountability

Extraordinary details regarding gross incompetence and neglect are being revealed at the Committee on Public Enterprises (COPE) of Parliament which is conducting hearings into the circumstances of the economic collapse. 

This week member of the Monetary Board, Dr. Ranee Jayamaha told the committee that then Governor of the Central Bank, Prof. W.D. Lakshman, and Treasury Secretary S.R. Attygalle, along with nominated member to the Board, Samantha Kumarasinghe had decided to fix the Sri Lankan currency at an artificial exchange rate which depleted foreign currency reserves and ensured the plummeting of remittances by expatriate Sri Lankans. In other words, according to the statement by Dr. Jayamaha three individuals had precipitated the worst economic crisis in Sri Lankan history.

       It was also revealed that former Prime Minister Mahinda Rajapaksa, who was also the Minister of Finance was briefed on numerous occasions on the danger of such populist yet irrational policies but he and other leaders of the administration had chosen to ignore the warnings.     

 The warnings from the International Monetary Fund (IMF) and rating agencies that predicted a sovereign default, were ignored. Despite these dire warnings and dwindling foreign currency reserves, Central Bank Governor Ajith Cabraal, who replaced Lakshman, not only paid a bond of $ 500 million that matured in January 2022 but continued to burn the last remaining foreign currency to maintain the artificial exchange rate.

COPE chairman Prof. Charitha Herath quite correctly identified these failures of those who were responsible for the management of the economy as criminal. It is now becoming clear that a handful of individuals were responsible for the catastrophic collapse of the economy and yet none have been held accountable for these actions. COPE should summon former governors of the Central Bank Ajith Cabraal and W.D. Lakshman and demand to know the reasons behind their irrational decisions. It needs to be further established if they were influenced in any way by others concerning these decisions, and if so such individuals should be identified.

    This is also a reflection of the failure of Parliament to act as an effective check on the executive branch of the State. On numerous occasions Cabraal in his capacity as governor of the Central Bank and State Minister for Finance had refused to brief Parliament on monetary policy and even refused summons to appear before Parliament. Such individuals should not be allowed to get away without answering to their actions. In this context it is good to note that some judicial action initiated by individuals are proceeding in the Courts. Colombo Magistrate’s Court has extended the travel ban imposed on Cabraal until 25 July after he was named as a suspect in a personal complaint filed alleging misappropriation of funds while serving as the Governor. The court has also ordered the Central Bank to reveal the beneficiaries of suspicious, sovereign bond repayment in January.

    While these individual actions demanding accountability are praiseworthy they would not suffice considering the magnitude of the crimes involved. For example, sovereign bonds are held in trust mostly by banks on behalf of their clients. 

The list of beneficiaries of the January repayment would likely reveal these entities that held the bonds on behalf of their clients rather than identifying the actual beneficiaries. In order to discover those individuals and to see if there were any conflicts of interests or possible criminal liability such as insider information a more methodical and high level investigation needs to be carried out which would involve getting international assistance. Such actions can only be taken by governments and not by magistrate courts or individual litigation. 

If the current administration of Prime Minister Ranil Wickremesinghe wishes to regain some credibility to the Sri Lankan financial system he would be prudent to initiate such a thorough investigation that would reveal the true culprits of the current economic calamity. Those who brought about this economic disaster must be held accountable for their actions and they must pay for the harm done to 22 million Sri Lankans.