Cabraal’s crocodile tears!

It was a pity to see the former CB Governor taking great pains to quantify the losses that the economy suffered as a result of the controversial bond issue. Cabraal shows a great deal of sympathy at the fate ordinary housing loan borrowers have to undergo on account of the alleged additional interest mark-up arising from the distortion created by the Treasury bond issue.

It is ironic as to why he did not have the same concern towards the wellbeing of the private sector employees when he was heading the monetary board, in which position he was responsible for the investments of the EPF. Some of the investments EPF made in the stock market when he was the governor defied any logic. On what grounds those investments were undertaken cannot be fathomed by anyone with a sound understanding in finance matters.

The financial impact of the EPF’s equity investments can be observed by perusing the Annual Report of the EPF in 2012. As at 31 December 2012, the market value of the EPF’s listed equity portfolio was Rs. 54,597.3 million for which the cost was Rs. 62,914.3 million, resulting in an unrealised loss of nearly Rs. 8.317 billion (refer page no. 236 of EPF Annual Report 2012). Few of these investments raise so much suspicion.

 

The Finance Company (TFC)

Everybody is aware as to what happened to the former NSB Chairman Pradeep Kariyawasam when NSB bought shares of TFC in 2012. There was a huge public opposition and Kariyawasam had to resign from his post. However Cabraal was not unlucky as Kariyawasam and he continued to remain in his post. If it was wrong for the NSB to buy shares of the TFC, how was it correct for the EPF to do the same?

 

The Galadari Hotel

The EPF purchased a substantial stake in Galadari Hotel in 2010 from Jayantha Dharmadasa’s Nawaloka Hospital. Galadari even then was a heavily debt ridden hotel and had not paid any dividends for years. Why did the EPF buy shares of this hotel in such a backdrop? It is a common practice for pension funds such as EPF to not to invest in stocks that do not pay dividends. EPF has not earned anything out of this investment for five years now. When Dharmadasa disposed this stake to EPF he realised a huge capital gain and he is certainly a one blessed individual.

 

SriLankan Airlines 

Not much needs to be said about the financial health of the national carrier. What happened to the national carrier under the previous government was brilliantly revealed by the Weliamuna committee. However the EPF had no hesitation in investing in SLA in spite of the aviation industry being known as a highly capital intensive risky industry. The Public Accounts Committee of the parliament had observed that EPF had not earned a cent out of its investment of Rs. 500 million in SLA in 2010.

Cabraal must explain why he approved these ridiculous investments when he was heading the Monetary Board? Being a qualified accountant with decades of experience he should have done lot better.

It is in fact hilarious to see Cabraal raising various question marks over the eligibility of Arjuna Mahendran being appointed as the Governor of the CB. He sanctioned the appointment of Lakshman Hulugalle, a convicted criminal, to the largest private commercial bank in the country. Before pointing fingers at others, Cabraal must look into his mirror.

Ashoka Mihindu