Treasury Bond fiasco leads to Rs. 42.5 b bleed claim analysts

Friday, 17 April 2015 04:47 - - {{hitsCtrl.values.hits}}

Just five weeks after the controversial 30-year Treasury Bond issue, the country has incurred an additional Rs. 5.3 billion as higher interest costs for this year alone and the incremental borrowing cost during the tenure of the different T-Bills and T-Bonds issued within the last five weeks will now cost the country a staggering Rs. 42.5 billion. This is on the basis of an expert computation (See Page 5) of the increase in interest costs that has been suffered by the Government as a result of the 30-year bond interest rate being artificially increased on 27 February 2015. “This massive loss is increasing every time Treasury Bills and Bonds are issued from 27 February 2015 onwards,” analysts said. They claimed that it had already reached mega proportions and was easily the single largest loss that the Sri Lankan Government has ever suffered in its history. “What is worse is that it is continuing and the losses are mounting every week. This bleeding must be stopped urgently if the economy is to be safeguarded,” they opined, claiming that the Interim Government was in a state of denial with regard to these losses. “The interest rates are now artificially high as a result of the bond fiasco, and the government as well as all the people are now paying those unnecessarily high rates,” said the analysts, adding that the benefit of the low inflation regime enjoyed in the recent past was being squandered.

CB Chief questioned by Bribery Commission

The Bribery Commission yesterday recorded a statement from Central Bank Governor Arjuna Mahendran in connection with a recent 30-year Treasury Bond issue. The Governor, who is on leave in Sri Lanka pending the completion of an investigation into allegations of insider trading in the latest 30-year Treasury Bond issuance, had reportedly been questioned for about six hours. It could not be confirmed whether yesterday’s questioning was linked to the findings of the three-member experts committee appointed by the Government over the bond fiasco or based on separate complaints made to the Bribery Commission. Prime Minister Ranil Wickremesinghe on 9 March appointed a three-member committee to investigate matters concerning the 27 February 30-year Treasury Bond issue. The committee’s report was handed over to the Prime Minister on 10 April but it has not been made public yet. The Prime Minister, who said that it was the new Government which introduced a more transparent bond auction system, has assured Parliament that the experts committee report would be tabled after submission. Mahendran’s passport has been impounded since 13 March following the launch of a probe into the Treasury Bond issue. Mahendran, a Singaporean citizen, took office as the Central Bank Governor on 26 January this year. At the Treasury Bond Auction of 27 February, the 30-year bonds were to be issued at a market rate of 9.5% to raise Rs. 1 billion. The issue was however closed at 12.5% with the bank accepting Rs.10 billion from Rs. 20.7 billion bids received. It has been alleged that “insider trading” has taken place during the transaction from which Governor Mahendran’s son-in-law’s firm has benefited. Several political parties such as the SLFP and JVP have called for the resignation of Governor Mahendran due to the allegations. In a related development, the Supreme Court will take up the fundamental rights violation petitions filed against Governor Mahendran, Treasury Bond Tender Committee Chairman P. Samarasiri and several others on 28 April and 5 May. The petitioners Dr. G. Uswattaarachchi, Dr. A.C. Viswalingam and Chandra Jayaratne seek an independent inquiry into the alleged fraud in the Treasury Bond issue. They had sought an inquiry into the public debt management conducted under the supervision of the Court. The resulting findings are to be submitted to Court for perusal and direction. The petition has named eight respondents including Governor Mahendran, his son-in-law Arjun Aloysius, Deputy Governor P. Samarasiri and the Secretary of the Finance Ministry. The petitioners have said that the Bond issue on 27 February by the Public Debt Department of the Central Bank lacked transparency and resulted in a “significant incremental unwarranted” cost for Sri Lanka. The petition was filed through Attorney-at-Law Lilanthi de Silva and will be supported by attorneys Saliya Peiris and Pulasthi Hevamanne.