Verité Research’s “FactCheck” on RW’s claim on EPF contested

The office of former President Ranil Wickremesinghe has sent us a clarification on the FactCheck published by Verité Research in our paper on March 21. This is what it says;      

We write regarding the above mentioned article which was published in your newspaper on the 21st of March 2025.  

The headline and the content of the article are false, and have been distorted to misrepresent the meaning of Former President Ranil Wickremesinghe’s statement.   

Contrary to the claim that former President Wickremesinghe stated that the EPF was subject to “ONLY” maturity extensions is false. The word “only” has been added by Verite Research to misrepresent the meaning of the statement.   

Furthermore, accusations that the EPF has been subject to large losses due to the Domestic Debt Optimisation (DDO) is inaccurate. If Verite Research had referred to the EPF’s 2023 Annual Report they would have noted that no losses had been reported due to the DDO bond exchange. It must also be noted that a loss cannot occur due to maturity extension of an instrument that is held to maturity and accounted in the amortized cost portfolio.   

A detailed explanation is provided below 

It is unlikely that Verite Research has been able to provide an unbiased opinion of the Domestic Debt Optimisation undertaken by the former President Ranil Wickremesinghe’s government as this organization had presented their alternative plan. As such a fact check carried out by a organisation with a vested interest should not be considered 

Accusations that the EPF has been subject to large losses due to the Domestic Debt Optimisation (DDO) is inaccurate

We request that this rebuttal to the baseless allegations levelled by Verite Research be provided the same prominence as the original article. It is essential for the country’s economic stability and recovery that false statements such as those made by Verite Research are rebuked in it’s entirety.   

Debunking Verite Research Claims on EPF losses “The analysis in the FactCheck on losses to the EPF due to the Domestic Debt Optimisation is flawed for the following reasons;   

1. EPF’s Annual Report confirms that the EPF did not suffer a loss due to the DDO bond exchange   

When a FactCheck is assessing whether an entity made a gain or a loss, the logical first step in the process would be to examine the financial statements or annual reports of the entity in question. In this case the entity is the Employees Provident Fund (EPF) and the FactCheck is assessing whether the EPF made a loss due to the bond exchange associated with the Domestic Debt Optimisation (DDO) in September 2023.   

Accordingly, the first point of reference for such a FactCheck ought to be the EPF’s Annual Report of 2023, which would have to disclose any such loss. However, there is no reference to the EPF Annual Report of 2023 in this FactCheck, which raises serious questions on the methodology and rigour of the process.  

When the EPF Annual Report of 2023 is examined, there is a detailed reference to the Bond exchange related to the DDO in September 2023. On page 312 of the Annual Report, it is clearly stated that the EPF “does not recognize any gain/(loss) on bond exchange.”   

To add a further level of scrutiny, the Auditor General also has oversight of the EPF’s annual report, and the Auditor General’s report on the same is reflected from page 340 onwards of the EPF 2023 Annual Report. The Auditor General does not contest the EPF’s position that the DDO bond exchange does not result in a loss to the EPF.   
The fact that the EPF’s Annual Report confirms that the DDO Bond Exchange did not result in a loss and the Auditor General does not dispute that position should have been sufficient reason for a more careful analysis by any objective analyst.   

 Fact check carried out by a organisation with a vested interest should not be considered credible

2. A loss cannot occur due to maturity extension of an instrument that is held to maturity and accounted in the amortized cost portfolio.   

The FactCheck goes on to claim that the maturity extension of the bonds in the DDO Bond exchange results in a loss for the EPF. This is a basic lack of understanding of financial accounting. The following facts matter;   

i. A maturity extension will result in a loss reflected in the P&L if the instrument is booked in the FVTPL account of the balance sheet at the time of investment.   

ii. A maturity extension will result in a loss reflected in Other Comprehensive Income if the instrument is booked in the FVOCI account of the balance sheet at the time of investment.   

iii. A maturity extension will not result in a loss if the instrument is held to maturity and booked in the Amortised Cost account of the balance sheet.   

1EPF Annual Report 2023 https://epf.lk/wp-content/uploads/2025/02/EPF-2023-English-Final.pdf The EPF’s accounting practice clearly states that its fixed income instruments, including itsbonds, are all booked in the Amortised Cost account of the balance sheet.   

Therefore, a maturity extension cannot cause a loss since these instruments are held to   maturity and there is no reduction in the face value. This is evident from an examination of   the EPF’s Annual Reports. The 2022 Annual Report which outlines the treatment of bonds   prior to the DDO, confirms that all the EPF’s bonds were accounted in amortised cost (held   to maturity).”   

3. Losses due to Coupon Reduction   
The EPF received new bonds post DDO exchange with a step-down coupon structure.   Accordingly, until mid-2026 the new bonds receive a coupon rate of 12%. At present, the   secondary market yield of a 5 year treasury bond is 10.1% as of 24th March 2, indicating asignificant differential in favour of the EPF’s bonds.