by Shamindra Ferdinando Courtesy The Island

February 28, 2017, 10:51 pm
Former Senior Deputy Governor of the Central Bank of Sri Lanka (CBSL) Dr W. A. Wijewardena, on Monday (Feb. 27), alleged that even two years after the mega bond scam the government hadn’t conducted a thorough investigation to ascertain how primary dealer Perpetual Treasuries had received prior information as regards the CBSL’s last minute decision to issue treasury bonds to the value of Rs. 20 bn in spite of its initial call for bids for only Rs 1 bn worth of 30-year treasury bonds.

Dr. Wijewardena stressed that Perpetual Treasuries had been privy to information that hadn’t been available to other primary dealers.

Addressing a gathering at the launch of Rusiripala Tennekone’s Bedumkara Andaraya (The Tale of the Bond Scam) at the Mihikatha Medura, BMICH, the civil society activist said the CBSL had offered Rs. 1 bn worth of 30-year treasury bonds with a fixed interest rate of 12.5% to the market and then sold bonds to the tune of Rs. 10 billion, 10 times the original offer.

Stressing that the CBSL had never experienced a similar situation before, Dr. Wijewardena, who served the institution for nearly four decades, alleged that it failed to secure funds required by the government under terms favourable to the country. There couldn’t be any other responsibility far more important than obtaining required funds at the lowest interest rates possible, he said.

Recalling the leadership given by Governor A. S. Jayawardena to the CBSL, Dr. Wijewardena explained specific measures taken at that time to prevent a group of primary dealers from driving up the interest rates to their advantage at the expense of the national economy. ASJ had introduced those measures in 1997.

Dr. Wijewardena said that Rusiripala had revealed the period from Feb 23 to Feb 27 afternoon a la Agatha Christie. Rusiripala alleged Governor Arjuna Mahendran’s intervention on behalf of Perpetual Treasuries and the spirited but the unsuccessful effort made by the Superintendent of the Public Debt Department to thwart the move.

Mahendran had done something unprecedented Dr. Wijewardena said, adding that he had entered the room where the auction was being conducted. The retired CB Deputy Governor insisted that except for those who had been assigned the task no one else could enter that room. The Governor had no right whatsoever to enter that room, Dr Wijewardena said, noting that he hadn’t entered that room during his 37-year career.

Explaining the circumstances under which Mahendran had reduced his decision to issue treasury bonds to the value of Rs 20 bn to Rs 10 bn, the former Central Banker said that by 3 pm, on February 27, 2015, the entire market was aware of the sordid operation though the government ignored the unprecedented crisis.

The Employees’ Provident Fund (EPF) had suffered massive losses due to Feb 27, 2015 bond scam, Dr. Wijewardena said, adding that those who perpetrated the fraud had made a killing at the expense of the workers’ fund.

Noting that the alleged fraud had caused irreparable damage to the CBSL, Dr Wijewardena asserted that the failure on the part of the government to act swiftly and decisively had certainly contributed to rapid loss of CBSL’s reputation in the eyes international investors. He attributed Sri Lanka’s failure to attract foreign direct investment as well as large scale shifting of funds from foreign reserves to the CBSL fraud.

Referring to latest available figures, Dr Wijewardena urged the government to act resolutely at least now. Drastic measures were required to restore investor confidence, Dr. Wijewardena said.