Proxies of former regime haunt Central Bank

Bond scams from 2005 to 2014 swept under the carpet:

by Lalin Fernandopulle

The Rajapaksa regime, allegedly involved in large scale Treasury Bond scams, are using the present Central Bank Bond fiasco to sweep under the carpet mega fraudulent Bond transactions carried out from 2005 to 2014, a senior economic analyst said.

Former President Mahinda Rajapaksa and his cohorts who dealt with the financial affairs of the country are still haunting the Central Bank through proxies to exploit opportunities and tarnish the image of the bank and bring disrepute to the good governance administration, analysts said.

Thilak Mahanama, an economic analyst said the Opposition is making a hue and cry, over the Central Bank Treasury Bond issue having turned a Nelsonian eye and being mum on several government Bond issues carried out by the former President as Finance Minister with exorbitantly high interest rates ranging from 11 percent to around 18 percent during his two stints in power. Treasury Bonds were raised at 15.5 percent in 2007, 18.5 percent in 2008 and 11.5 percent in 2014.

The former President issued Treasury Bonds to his favoured primary dealers over the phone. He forced State institutions including the EPF, National Savings Bank and the Bank of Ceylon to buy Treasury Bonds at low interest rates ranging from six to eight percent when the EPF could have been offered a higher interest rate for the benefit of retirees, Mahanama said.

The Opposition is banking on the present Treasury Bond issue to muster votes making a mountain of a molehill to hoodwink voters with tommyrot and false statements on the political stage, analysts said.

All 14 primary dealers who participated in the Bond auction were informed of the increase of the bond amount from Rs. 1 billion to Rs. 10 billion owing to the need for funds to pay salaries of State sector workers, resume mega development projects such as roads and highways.

The dealers also knew that the revised amount had Cabinet approval. The Rs. 6 billion loss due to increasing the Treasury Bond interest rate to 12.5 percent as portrayed by the Opposition is an exaggeration. The 9.5 percent interest rate bidders agreed to buy bonds to the tune of Rs. 5 billion while the 10.5 and 11. 5 percent bidders refused to buy the remaining Rs. 5 billion paving the way for the 12.5 percent bidder, Perpetual Treasuries Limited, an authorised primary dealer. Perpetual Treasuries is owned by Perpetual Capital Holdings in which Shiromi Wickremesinghe, the sister of former Central Bank Governor Ajith Nivard Cabraal, is a member of the board of directors. The present Governor Arjuna Mahendran’s son-in-law is a director of Perpetual Treasuries.

Analysts said that this is how the Treasury Bond mafia was carried out by Perpetual Capital Holdings through Perpetual Treasuries which was willing to buy the Rs. 10 billion bond at an interest rate of 12.5 percent. The actual difference in the interest rate is three percent with Rs. 5 billion bonds purchased at 9.5 percent and the other Rs. 5 billion at 12.5 percent. The three percent difference in interest rate does not accrue to a loss of Rs. 6 billion or the other startling amounts as projected by the Opposition and critics with sinister motives.

Controversy has plagued the Central Bank Treasury Bond issue that took place on February 27 this year, where it is alleged that the son-in-law of the present Central Bank Governor had advance information which was used to gained huge profits in trading.

It is to the Monetary Board of the Central Bank that the Government orders to issue Treasury Bonds and not the Central Bank Governor on whom the Opposition has pinned the blame on. The Monetary Board which is headed by the Governor of the Central Bank comprises the Secretary to the Finance Ministry and three non-executive members.

The order to issue Bonds was presented to the Central Bank Monetary Board which studied the request and submitted it to the Public Debt Department of the Central Bank on behalf of the Government. The Public Debt Department issues debt instruments and handles all matters relating to servicing the domestic and foreign debt of the Government.

The Treasury Bond issue was carried out in a transparent and authentic manner as per the directive of Prime Minister Ranil Wickremesinghe who is also Policy Planning and Economic Affairs Minister. This was in complete contrast to the way bonds were issued by the former regime which was not transparent, analysts said.

A Bond is a debt instrument, either medium or long-term, that a government or a company issues to raise money. It is a contract between a government or a company — which acts as the borrower — and investors who act as the lender. Mahanama said if economic analysts are given a chance they will present the actual picture to counter those who accuse the Central Bank Governor of carrying out a scam.