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Former Central Bank Governor Ajith Nivard Cabraal
By Himal Kotelawala
Former Central Bank Governor Ajith Nivard Cabraal said yesterday that the controversy surrounding the 27 February Government Bond issue has resulted in a loss of over Rs. 59 billion to the state due to increased interest rates.
To put this into perspective, Cabraal said, the money that was lost could have been used to build the Galle-Matara stretch of the Southern Expressway three times over. Even the total budget allocated to education and higher education amounts to just Rs. 53 billion, he added.
“This is the biggest scam in history. Bigger than all others put together,” the former Governor charged.
Explaining the fiasco, he said on 27 February, a bond that could’ve been issued at Rs. 119 was issued at Rs. 90, Rs. 91 at a rate of 12.5%. The loss incurred to the Government was Rs. 291 million for every billion.
“There was a direct loss of Rs. 2 billion on the same day,” he said.
When the 9.5% interest was artificially raised to 12.5%, said Cabraal, all other interests increased with it, impacting the yield curve.
“One need not be an expert in economics to understand what a tremendous loss this is to the country,” he said, adding that the interest rates were still increasing.
The former Governor accused the Government of not taking the matter seriously, alleging that Prime Minister Ranil Wickremesinghe had attempted to brush it under the carpet.
“The Government should’ve looked into this. Instead of trying to cover up the issue, the Prime Minister should’ve tried to stop what became the country’s biggest scam resulting in a huge loss,” he said.
Cabraal pointed out that the issue was out in the open and was part of a ministry under the direct purview of the Premier.
“If he’s trying to cover it up with such rigour, we have to ask what the inside story is,” he said.
Elaborating on the impact of the alleged scam, Cabraal said that the Government Bond interest cycle determines all interest rates in every aspect, from vehicle leases, housing loans, (as Bond interest determines other interest rates).
“This has resulted in everyone suffering the consequences, having to pay extra in interest. We are still trying to ascertain the total damage. When a new Government is appointed the exact figure must be calculated and those responsible have to be punished. There is a clear fraud here. We have all the data,” he said.
Cabraal went on to say that the Central Bank Governor is a highly respected position and it is imperative that global markets can trust his opinion. This controversy might have caused irrecoverable damage to that position, said Cabraal, resulting in yet another loss to the country.
“The next Government has a big responsibility to investigate this and punish those who tried to cover it up, no matter how high up,” he said.
“Perhaps these individuals may not be in such power and position in the near future,” he added, hinting at a change in government.
Pix by Upul Abayasekara
