Ranil At Bay: Dodging The Question As To Whether Mahendran Lied

By Rajiva Wijesinha –29November 2017 

As we move to the questions addressed to the Prime Minister about the details of what took place in February 2015, the obfuscation gets more striking. So it seems desirable to add on the underlying rationale for misleading answers that were submitted, in the secure expectation that no probing questions would be asked, Dappula de Livera and Yasantha Kodagoda having been pushed aside.

(11)

Question number 11 is as follows-

“The evidence before this Commission of Inquiry suggests that, any sudden stoppage of the practice of accepting Private Placements of Treasury Bonds was likely to significantly impact the Government Securities Markets, the Treasury Bond Yield Curve and Interest Rates paid and offered by Bank… Further, the evidence before this Commission of Inquiry suggests that, in terms of the Monetary Law Act and the procedures which then prevailed in the CBSL, any proposal to stop the entrenched practice of accepting Private Placements of Treasury Bonds, should be considered by the Monetary Board and decided upon by the Monetary Board, before it was implemented.

… in the light of the aforesaid considerations, what did you expect Mr Mahendran to do in pursuance’ of any instruction you may have given to him, on 24th February 2015, with regard to Private Placements?”

My reply is as follows-

I am not going to answer that question but will simply say again that under the last Government, the determination of interest rate in the Government securities market had been distorted by moving away from a market based mechanism. This had led to a loss of investor confidence.

To the best of my knowledge, private placements were not entrenched in the securities market.

Furthermore, as private placements invariably took funds from captive sources such as the EPF, the beneficiaries of such funds received diminished returns on their savings. We found a better way to reduce benefits by putting people in decision making positions at the EPF and so on, who would buy bonds at exorbitant rates from our chosen beneficiaries. Our policy has always been to encourage market mechanisms and to further macro economic liberalization including the rates of interest and exchange to be determined by the market, but in the short term, to benefit our chosen capitalists, we put a group of shysters in charge of various institutions so that our friends made massive profits and EPF beneficiaries got much less which went to these friends rather than the country, which Eran had identified as a big problem.

… any adverse impact on the market would have been minimal in the short term and off set by long-term investor confidence, and you must not blame me for the collapse of confidence in our ratings.

…. it was expected that Mr Mahendran would take appropriate steps in accordance with due procedures to give effect to the objectives of the Government as expeditiously as possible in the light of concerns expressed by me and this he did, since my concern was to pay the party debts, and the principles I have enunciated above were platitudes to fool you guys and the country at large.

(12)

Question number 12 is as follows-

“The evidence before this Commission of Inquiry suggests that, the Ministry of Finance had identified that a substantial sum of money was required to fund payments …..(but) the Monthly Cash Flows forwarded by the Treasury to the Department of Public Debt in the Months of February 2015 and March 2015 do not call for any funds to be raised for the above purpose in February 2015 or March 2015.

The evidence before this Commission of Inquiry suggest that, a meeting was held at the CBSL on 26th February 2015 to discuss how to raise the funds required to make these payments and …. it was decided -that a Deputy Governor of the CBSL will prepare a report identifying the payments that were due and ….. another meeting was to be held later for the purpose of considering the report…

the evidence before this Commission of Inquiry suggests that, the funds required for these payments were to be raised only in the months of April or May 2015 and that, there was no requirement for any funds for this purpose to be raised at the Treasury Bond Auction held on 27th February 2015 or at Treasury Bond Auctions to be held during the month of March 2015.

In this background, did you instruct Mr Mahendran to raise funds for the aforesaid payments at the Treasury Bond Auction held on 27th February 2015?”

My reply is as follows-

Why are you talking about evidence when I, the duly appointed Prime Minster of this country, issued instructions as to what was needed, to benefit me and my friends which of course would benefit the country in the long term? What you should accept is thatat the Cabinet Sub Committee on the Economic Management, Budget proposals for which funds were needed and development projects for which payments were due, were discussed. The people on that Committee do as I say, and The Minister of Highways stated that there was an urgent need of funds for road development projects, which were undertaken by the previous Government for which the Treasury was unable to provide funds. The Interim Budget also involved additional expenditure including an increase in recurrent and capital expenditure in March. I requested that the concerned Ministers and officials of the Treasury and CBSL meet as soon as possible. Subsequently, they including the Governor CBSL had met on 26th February 2015 and they determined that Rupees Fifteen billion was urgently required. By this time, CBSL has already decided on a bond issue on 27 February, 2015.My current answer is intended to suggest that the two matters are not connected, and that is why my chums Kabir and Malik claimed that it was not decided on the 26^th to raise the funds we wanted through the bond issue, and I am sorry that I let the cat out of the bag in March 2017 by saying that was decided then.

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