Ranil faults CB over loss on Greek bonds

18 July 2012 05:03 am

Opposition United National Party (UNP) Leader Ranil Wickremesinghe yesterday blamed the Central Bank for the loss of US$6.6 million, which was invested in Greek Bonds and said Parliament could not ignore these questionable deals just because the total investment was remunerative as claimed by the Central Bank.

“What the Central Bank keeps saying is that since the investments made in other countries were remunerative, this loss is a minor matter. Anybody can understand it to be an unfair statement. Each investment must be taken up separately and checked by parliament whether remunerative or not. Parliament cannot ignore the detrimental investments just because the total investment was remunerative,” Mr. Wickremesinghe told Parliament.

“The main objective of investing in overseas bonds is to earn a larger income. Therefore, it’s customary to penetrate very scientifically into the future goals prior to engaging in such investments. They are initiated only after in-depth inquiry in market conditions. There is no indication that such an inquiry has been made before investing in Greek Bonds,” he said.

“According to what has been pointed out by economic analysts, the whole world began to see the degeneration of the economy in Greece in 2009.  The most serious economic collapse that came about after re-establishment of democracy in Greece in 1974 came to surface towards the end of 2009 owing to world economic crisis and unlimited government expenses.

“A clear trend of degeneration in Bonds appeared by April 2010.  With a view to saving the economy that was falling down, International Monetary Fund (IMF) and European countries offered a sum of 110 billion euros in May 2010. The situation deteriorated by the end of year 2011. It had to receive further loans in 2012. Not only that, yet another example indicating this degeneration is the figures of Gross Domestic Product in Greece.

The figure of GNP in 2010 was minus 3.5 which became a minus 6.9 in 2011.  Situation being such nobody would purchase Greek Securities or Bonds. In fact, many who foresaw this situation sold their Bonds. But, the Central Bank of Sri Lanka did the right opposite that is to purchase Bonds.

“Not only that, certain facts as to whether approval of the CB Monetary Board has been obtained on this investment have been exposed through media. The Auditor General has said this investment is problematic. Equally, the mass media had reported that this matter has been carried out by ignoring even the guidelines issued by the Auditor General not to invest in these Bonds,” he noted.  

In response Senior Minister Sarath Maunugama admitted that the Government had lost US$6.6 million by investing in Greek Bonds. He said these losses were incurred in two instances when the Central Bank had sold the bonds.

He said the Central Bank had sold a part of the Greek Bonds for the face value of Five million Euros at a loss of US$1.1 million in July last year. This precaution was taken as Euro Zone took a turn for the worse few weeks after this investment was made. This measure was taken to mitigate the risk of Greek investment,” he said.

The Minister said the Central Bank decided to dispose a further 10 million euros at face value at a loss of US $ 5.5 million in November last year.
The senior minister said Sri Lankan had however earned US$430 million from foreign investments last year.

He said the investments made on Greek Bonds were purchased in keeping with foreign exchange reserve management guidelines approved by the Monetary Board. (By Yohan Perera)