CBSL’s frivolous attitude - the controversial gazette

By Janitha Devapriya

The Central Bank has got itself into another controversy in the aftermath of the much talked about Treasury Bonds issue of 27 February, 2015, where the gazette notification that needs to be published before the issue of Government Debt instruments to meet the funding needs of the Government was in fact published more than one-and-a-half years after the actual incident. The said Gazette No. 1895/19 of 1 January, 2015 was required to be published before the issue of Treasury Bonds by the Central Bank in terms of the Registered Stock and Securities Ordinance No. 7 of 1937 and subsequent amendments. However, the Gazette, though dated 1 January, 2015 was actually published in November 2016. This came to light when the State Counsel leading evidence at the Presidential Commission of Inquiry probing into the controversial bond issue stumbled upon the fact that the issue date stated on the gazette was not the actual date on which it was published.

The Government Printer was thereafter summoned to clarify the discrepancy in the dates. According to the acting Government Printer Gangani Liyanage, though the Gazette was reserved by the Central Bank to be issued on 1 January, 2015, the material or text was sent by the Central Bank as late as November 2016 and she has stated that this had been the practice adopted often by the Central Bank on earlier occasions too. She further explained that when the matter was raised with the Central Bank, one ‘Wasana’ of the CBSL instructed her to go ahead regardless. Is this Wasana more powerful than a Deputy Governor?

According to section 4 (1) of the act: The Minister in charge of the subject of Finance shall, in respect of each loan to be raised under this Ordinance, specify by Order published in the Gazette— (a) the sum of money to be raised by that loan; (b) the modes of raising the loan and the manner in which such loan is to be raised; (c) the rate of interest payable on the loan or the method of determination of the rate of interest payable; (d) the dates on which interest on the loan shall be payable; (e) the rate at which, and the periods at the end of which, appropriation out of the Consolidated Fund and assets of Sri Lanka. 

There are however, no provisions in the act or subsequent amendments to issue the requisite gazette subsequently, as explained by the present Governor Dr. Indrajith Coomaraswamy, as ‘post operation’. The Governor explained certain practical issues on the difficulty of publishing the Gazette prior to issue of bonds. But this is not an acceptable position. Usually, the execution of provisions, sections or clauses in any enactment or ordinance has to be done by the issue of a gazette by the subject minister and in this case, it is the Minister of Finance.

Another twist to the controversy

However, the said Gazette notification supposed to be issued in the first week of January 2015 was said to have been signed by the former President and Finance Minister Mahinda Rajapaksa. 

This adds another twist to the controversy. The current Secretary to the Treasury (Finance) has stated that he was not the Secretary of Finance on 1 January, 2015 and he was unaware of the gazette in question. Former President and Minister of Finance Rajapaksa claims he is not the signatory. According to the evidence led at the Commission of Inquiry, the signature on the gazette notification in question is affixed by way of a rubber stamp containing a facsimile of the signature of President Mahinda Rajapaksa.

This leads everyone into another legal jumble. If the alleged signatory accepts the purported signature, the document may be accepted as legally executed. If the signatory disowns the signature, in this case the rubber stamp bearing the signature of former president, then it becomes invalid and it may make the bond issue of 27 February, 2015 and all subsequent issues until the matter had been rectified, invalid. 

The CBSL Governor and the Finance Minister went as far as to assure that it will not invalidate the Bonds and the Government through the Central Bank will honour them when they fall due. 

There is now a poser for the legal experts to untangle this legal jumble and advise the Central Bank Governor and the Government on how to legitimise the Treasury Bonds issued under the said gazette.

The need for serious investigation

Another question is whether President Rajapaksa authorised the use of a rubber stamp bearing a facsimile signature of his and how this came to be used by Central Bank staffers even after the former President relinquished his duties as Finance Minister. It also begs the question – ‘on what other documents was this signature used?’ Anyway, this borders on possible forgery even without fraudulent intent. The Governor therefore should investigate this fully and seriously and not flippantly explain away the serious situation by using simplistic expressions like “post operation”. 

The Central Bank is the apex body of regulatory authorities in Sri Lanka and it cannot afford to have controversial lapses occurring in this manner. 

This will possibly have some adverse impact on the reputation of the country at a time when the political leadership is trying to draw investors, financiers and big business organisations of the world to engage in the economic activities of the nation.

It is also surprising that these somewhat irregular procedures of the Central Bank went unnoticed all these years, which the auditors, senior management of the Central Bank, who are reputed to be veterans in the game, failed to address. 

It is also strange that some ex-central bankers who are now issuing critiques on the former Governor Mahendran’s conduct, and who were trying to justify the leaking of internal information as “whistle-blowing” did not think it fit to recommend changes to the enactments or ordinances that govern the Central Bank functions like public debt management, years ago, when the operations had to be streamlined and updated to meet emerging market conditions and practices.