Governor’s bond tender interference would make us go naked: Sri Lanka central banker

ECONOMYNEXT- A senior central banker had protested interference by ex-Governor Arjuna Mahendran in a 2015 bond auction, saying a tender board member would have to go naked after following his orders, a commission of inquiry was told.

Retired Assistant Governor C Karunathilake said he was member of a tender board that oversaw a bond auction on February 2015 where 10 times the volume of the bonds offered at an auction was sold.
A Presidential Commission is inquiring into so-called bond scams, involving allegations that the auction was one of several in 2015 and 2016 that was rigged to benefit Perpetual Treasuries, a firm connected to Mahendran’s son-in-law. Mahendran has denied wrongdoing.

Assistant Governor C Karunathilake said at a bond tender committee meeting that the Department of Public Debt officers had presented a sheet showing 10 billion rupees of bonds to be sold when only a billion was advertised.

Bonds were accepted at rates around 11.7 percent when market rates at the time was around 10 percent, he said.

Assistant Governor Sepala Ratnayake had objected.

Karunathilake said he shared the concerns of Ratnayake although they were not voiced. He felt other members of the tender board also felt the same.

Ratnayake had objected saying, ‘we will have to go without clothes’.

Members of the Public Debt Department defended themselves saying they had originally recommended that 2.6 billion rupees of bids be accepted, but they had been forced to go with 10 billion rupees on the instructions of Governor Mahendran.

He said he did not remember seeing a minute by the Superintendent of Public Debt on the document.

Deputy Governor P Samarasiri, who was chairman of the tender board, had been prevailed upon to speak to Mahendran and explain the consequences of selling a large volume of bonds at high rates, Karunathilake said.





Mahendran was not contactable on the intercom system, where they would have all been able to hear him on the speakerphone. Samarasiri had thereafter left the room and returned apparently after speaking to Mahendran, Karunathilake said. He was not aware how the governor was contacted.

Speaking in Sinhalese, Samarasiri had said ‘Apita Meka Ganna Wenavar (We will have to take this),’ Karunathilake recalled. The reason given was that the government needed the funds, he said.

Karunathilake said he understood that there were alternative funding methods and he expected the Public Debt Department to ‘place’ more bonds outside the auction.

He had then left the room, along with Ratnayake. He had noted that Deputy Governor Samarasiri was dictating minutes to Dr (M) Assim, who was secretary. He was not aware what was in the minutes. (Colombo/Apr25/2017).

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