EPF losses from bonds, equity deals near Rs.20bn, with Rs.12bn in missed gains

Sri Lanka’s Employees’ Provident Fund (EPF) has incurred nearly Rs.20 billion in losses from bond and equity market investments, along with an additional Rs.12 billion in foregone earnings, due to the investments in unlisted equity that bypassed the due process, according to a report by Verité Research.

Based on the findings from two forensic audit reports commissioned after the 2015 bond scandal, the report found that the EPF lost Rs.9.83 billion between 2002 and 2015 from purchasing bonds at unfavourable prices. It also recorded losses of Rs.9.86 billion from irregular equity investments between 1998 and 2017, largely due to a ‘pump-and-dump’ scheme targeting the EPF.

Additionally, the fund missed Rs.12.38 billion in potential earnings between 2007 and 2017 by investing in unlisted companies, instead of government securities, which offer fixed positive returns.

However, the report noted that the full extent of the losses remains unclear, due to the limitations in the forensic audits. The bond market audit only covers transactions up to February 2015, excluding the losses that followed the 2015 bond scandal.  Furthermore, the audits only identify direct losses from transactions with documented irregularities and do not account for the foregone earnings from such deals.