Activists in court over bond deal

30 March 2015 03:47 am - 0     - {{hitsCtrl.values.hits}}

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Three good governance activists have filed a petition in the Supreme Court for an independent inquiry on the alleged bond sale fraud and requested the court to direct relevant authorities to set up proper regulatory framework to avert incidents of this nature in future.
The activists, Dr. G.Geedreck Usvatte-Aratchi (a prominent economist), Dr.A.C.Visvalingam (engineering consultant) and Chandra Jayaratne (former Ceylon Chamber of Commerce Chairman) have filed the public interest petition as a fundamental rights application.
The petition has named 8 respondents, including Central Bank Governor Arjuna Mahendran, his son-in-law Arjuna Aloysius, Perpetual Treasuries Ltd, Deputy Governor P.Samarasiri and Finance Ministry Secretary. 
The petitioners said the 30-year bond issue on February 27, 2015 by the Public Debt Department resulted in a ‘significant incremental unwarranted cost’ to the government of Sri Lanka. 
They also said the bond sale lacked transparency, adherence to accepted best practices of good governance and is tainted by conflicts of interests. 
After offering Rs.1 billion in 30-year bonds, the Public Debt Department of the Central Bank upsized the said issue little over 10 times, a phenomenon never happened before with regard to long-term tenor bonds, sending the yield up and thereby raising interest costs for the people. 
About half the bonds were allocated to Perpetual Treasuries, a company linked to Central Bank Governor’s son-in-law at 12.5 percent, much higher than the 9.25-9.75 percent price guidance given to dealers by the Public Debt Department initially. 
The petitioners also noted that there was lack of transparency, as to how Perpetual Treasuries was backed by state-owned Bank of Ceylon to submit a bid for 3 times the original issue size. 
The petitioners said the decision to upsize the issue size should have been transparently communicated to the market, allowing all participants to bid based on such information. 
The petitioners also said the statement by Economic Affairs and Policy Planning Ministry in the aftermath of the said bond sale didn’t “satisfactorily explain many apparent irregularities” relating to the transaction. 
According to the ministry statement, the bonds were sold because the government was in need of Rs.15 billion urgently. 
However, the petitioners said rather than increasing the 30-year bond volume to Rs.10 billion, the more cost-effective option would have been to sell bonds of different tenors.
“This option would have been more economical, and would have been in line with the current government’s debt management objectives of low cost and would have resulted in a more acceptable yield curve,” they said. 
The petition has been filed through attorney-at-law M Lilanthi De Silva and has been settled and will be supported by attorney-at-law, Saliya Peiris and attorney at law, Pulasthi Hewamanne.
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