Getting away with economic crimes

Monday, 31 October 2022 00:00 - - {{hitsCtrl.values.hits}}

Last week the Colombo Magistrate’s Court extended a travel ban imposed on former Central Bank Governor Ajith Nivard Cabraal until 24 November. This order was made when a personal complaint was heard before Colombo Additional Magistrate Harshana Kekunawala.

Cabraal has been named as a suspect in this personal complaint filed alleging misappropriation of funds while serving as the Governor of the Central Bank. The complaint alleges that during his tenure as the Central Bank Governor from 1 July 2006 to 8 January 2015, Cabraal had paid a sum of $ 6.5 million to Pakistani American political donor Imaad Zuberi without the approval of the Cabinet Ministers and as a result committed criminal breach of trust.

It further alleges that Cabraal, while serving as the Governor, caused a loss of $ 500 million to the Government through International Sovereign Bonds (ISBs) due on 18 January 2022. Cabraal is further accused of incurring a loss of Rs. 10 billion to the Government by appointing close relatives to positions dealing with monetary policy and releasing confidential information on Treasury bills and bond issues, during his tenure as the Governor.

Rather than a complaint by an individual citizen, Cabraal and those who caused the outright economic collapse should be investigated and prosecuted by the State. In addition to the alleged corruption and misappropriation, he and a few others are directly responsible for sheer incompetence with which the economy was handled.

As a result, in April this year, the Treasury and Central Bank announced the suspension of all external debt repayment and in May, Sri Lanka defaulted on its foreign bonds. Not a single individual who was responsible for this sovereign default, a first in Sri Lankan history, has been held accountable to date.

Sovereign default is the failure by a Government to repay its national debts and marks the point of bankruptcy. Countries are typically hesitant to default on their national debt since doing so will make borrowing funds in the future more difficult and more expensive. While ill-advised tax cuts in 2019 started the process that hurtled towards economic collapse, it was contributed to in no small measure by the Central Bank’s highly questionable decisions to maintain an artificial exchange by burning the precious foreign currency reserves.

Even at the face of bankruptcy with foreign currency reserves severely depleted, Cabraal ordered a repayment of a $ 500 million international sovereign bond (ISB) that raised many an eyebrow among economists. Was it sheer incompetence or was there far more sinister and corrupt motive as to why Cabraal decided to pay $ 500 million ISB holders from the country’s dwindling foreign reserves as Sri Lanka was facing a severe shortage of foreign reserves?

Whilst Cabraal justified the move, it needs to be investigated whether any individuals connected to politicians and officials had bought the bonds before it matured fully, at a higher interest rate and therefore made massive profits.

A handful of individuals are responsible for the economic collapse of the country. They must be held accountable for the misery they have caused. A thorough investigation into their corruption, incompetence, dereliction of duty and negligence should be carried out immediately. There is no doubt that they must face justice.