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The Parliament on Saturday passed the Domestic Debt Optimisation (DDO) with a majority 60 votes not before the Opposition MPs flayed the Government and the Central Bank during a marathon 10-hour debate.
Hundred and twenty two MPs voted in favour of DDO and 62 against. A considerable number of MPs abstained from voting or weren’t present at the time of the poll.
Whilst the Government MPs spoke good of DDO in terms of reducing public debt, interest rates and ensuring financial system stability as well as safeguarding of deposits of millions, the Opposition drew parallels to the infamous Bond scam when Ranil Wickremesinghe was the Prime Minister and the DDO deception as the President.
Leading the charge was main Opposition and Samagi Jana Balawegaya leader Sajith Premadasa whilst same criticism was levelled by the likes of TNA MP M. Sumanthiran, JVP’s Vijitha Herath as well as SJB’s Kabir Hashim and Dr. Harsha de Silva and SLFP MP Dayasiri Jayasekara.
Whilst the Opposition didn’t criticise or oppose the DDO in principle, the MPs castigated President Ranil Wickremesinghe’s Government for excluding primary dealers, private individuals and institutional investors accounting for 9% of total T. Bond holdings from the DDO and victimising superannuation funds such as the EPF and ETF.
This assertion exposed the fact that DDO wasn’t fair and equitable in sharing the burden of debt restructuring.
SJB Leader Sajith Premadasa alleged that by their exclusion President Wickremesinghe was protecting the rich and his cronies.
“We also wanted Sri Lanka to go to the IMF but the agreement signed is flawed. Additionally we fault the Government for the DDO and not the IMF as they didn’t recommend it. It is a bad deal,” Premadasa told Parliament, warning that a future SJB Government will renegotiate a better deal. “The DDR as it is, was only socialising the cost and privatising the benefits,” Premadasa alleged. Due to high inflation which rose to a record 70% last year locals have already suffered a natural haircut, he argued.
“The Government is protecting external creditors and punishing locals,” he claimed adding that Sri Lanka wasn’t benefitting from the likes of financial advisors Lazard and legal advisors Clifford Chance.
Alleging there wasn’t transparency, the Opposition Leader also said the Government should seek a 50% haircut from external creditors instead of the 30% implied by the Central Bank last week.
Armed with published statements, the SJB Leader also faulted the Central Bank Governor Dr. Nandalal Weerasinghe for originally denying the need and the case for DDR and eventually admitting its necessity and benefits. Premadasa also faulted the Treasury and CBSL for agreeing to highly unrealistic and dangerous targets such as the 2.5% primary balance from a negative 7% within a short period.
JVP’s Vijith Herath referred to the fact that urgent one-day debate on DDO was being held when two actions had been filed in the Supreme Court and scheduled to be taken up on 13 July. He said the DDO framework and the exclusion of private Treasury Bond holders has only forced a loss of confidence in the CBSL, Ministry of Finance and the Government. “The DDO isn’t equitable and transparent,” he said adding “Casting a heavy burden on the superannuation funds such as EPF is a serious injustice.”
He tabled in Parliament the Government’s failure in collecting taxes outstanding from several distilleries including W.M. Mendis and Company whose owners figured in the Bond scam when Wickremesinghe was the Prime Minister.
“The country is in grave danger because of the DDO and will weaken the economy rather than strengthen,” charged the JVP MP who opined the Government was busy in Domestic Corruption Optimisation (DCO) and not debt.
SJB MP Kabir Hashim recalled that during the debate of the 2022 Budget in November 2021, he urged the then Finance Minister Basil Rajapaksa to go for an orderly default thereby avoiding a domestic debt restructuring. However the then officials or Rajapaksa loyalists in the likes of Secretary to President Dr. P.B. Jayasundera and Central Bank Governor Nivard Cabraal were responsible for not heeding the advice hence they could be called “economic hit men.”
He also came hard on the exclusion of primary dealers and private Bond holders and linked them and other unscrupulous persons via shade equity deals causing massive loss to the EPF.
Hashim argued that commercial banks shouldn’t have been excluded either as any loss could have been met via recapitalisation with the help of multilateral organisations such as the World Bank and International Finance Corporation. “So by excluding the banks, the Government was only protecting the rich shareholders of these banks,” he alleged. The SJB MP said if the Government is so keen to look after the interest of 57 million bank account holders, the Government could have used the windfall that private bond holders will enjoy to write off, reduce or restructure the debt owed by small and medium enterprises.
He quoted a speech by Christine Legarde in June 2015 when she was the IMF Managing Director.
Quote: “Last month, on May 6th, I almost choked on my morning yoghurt when I saw the front page of a leading business newspaper. There it was – a league table of the world’s best paid hedge fund managers. It showed that the highest earner was able to pocket $ 1.3 billion in 2014. One man, $ 1.3 billion! Together, the 25 best-paid hedge fund managers earned a combined $ 12 billion last year, even as their industry suffered from largely mediocre investment performance. This reminded me of a famous Wall Street joke – about a visitor to New York who admired the gorgeous yachts of the richest bankers and brokers. After gazing long and thoughtfully at these beautiful boats, the visitor asked wryly: “Where are the customers’ yachts?” Of course, the customers could not afford yachts, even though they dutifully followed the advice of their bankers and brokers. Why is this relevant right now? Because the theme of growing and excessive inequality is not only back in the headlines, it has also become a problem for economic growth and development. I would like to take an economic perspective on this with you tonight. I will not focus on the gorgeous yachts of the super-rich, who have become the face of a new Gilded Age. It is not immoral to enjoy one’s financial success. But I would like to bring into the discussion what I would call the “small boats” – the livelihoods and economic aspirations of the poor and the middle class. In too many countries, economic growth has failed to lift these small boats – while the gorgeous yachts have been riding the waves and enjoying the wind in their sails. In too many cases, poor and middle-class households have come to realise that hard work and determination alone may not be enough to keep them afloat. Too many of them are now convinced that the system is somehow rigged, that the odds are stacked against them. No wonder that politicians, business leaders, top-notch economists, and even central bankers are talking about excessive inequality of wealth and income. Reducing excessive inequality – by lifting the “small boats” – is not just morally and politically correct, but it is good economics. End quote:
SJB MP Dr. Harsha de Silva quoted from an 18 November 2020 Hansard referring to his comments in Parliament on the debt restructuring. This was followed by his Party’s Blueprint released in February this year which also referred to avoiding a DDR.
He too spoke of DDO being unfair to the voiceless 2.5 million members of EPF and stressed the importance of getting members approval for the voluntary treatment of its debt.
SJB MP Lakshman Kiriella laughed at the irony that those who are responsible for causing Sri Lanka’s bankruptcy are today talking of solutions. He also faulted the Government for not ensuring equality in burden sharing. Noting that the current President and his Government doesn’t have a mandate, Kiriella called for the conduct of elections.
