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Thursday August 18th, 2022

Sri Lanka Attorney General blocks publication of EPF, bond, forensic audits

ECONOMYNEXT – Sri Lanka’s Attorney General has blocked the publication of forensic audits into Treasury bond sales from 2002 to 2016 and investments by the Employees Provident Fund in shares from 1998 to 2017 and bonds from 2002 to 2016.

But extracts could be selectively released with once with the approval of the AG.

The AG has withheld the release of the report saying they could hamper future investigations and legal action.

“The Attorney General has opined that the findings in the reports, annexes and exhibits should be treated as having the potential to be evidence in investigations and ongoing and future legal actions and access should be limited to those who have statutory authority to access them while emphasizing that the recipients maintain confidentiality in respect of the contents of the reports in order to avoid any possible prejudicial effect on investigations and ongoing and future litigation,” the central bank said in a statement.

“The Attorney General has further informed that once the reports and related documents have been fully considered, any extracts thereof which can be disseminated in the public domain without prejudice to investigations and ongoing or future litigation will be notified to the Central Bank.”

The full statement is reproduced below:

Forensic Audits

Arising from the recommendations of the Presidential Commission of Inquiry to investigate and inquire into and report on the issuance of Treasury Bonds during the period 1 February, 2015 to 31 March 2016 and matters that had come to light over the recent years in audit reports and findings of internal investigations relating to certain regulatory and agency functions undertaken by the Central Bank of Sri Lanka, the Monetary Board of the Central Bank of Sri Lanka, in consultation with the Auditor General, commissioned Forensic Audits (FAs) which were carried out entirely by personnel based outside Sri Lanka, of audit firms with a global practice and international experience who were selected by a Cabinet Appointed Consultants Procurement Committee (CACPC) in compliance with applicable government procurement guidelines. The Auditor General’s representative was an observer on the CACPC.

As stated in the notice issued to the public on 14 January 2019 on the progress of the procurement process to select audit firms, the FAs were conducted in five assignments as set out below on Terms of Reference that were finalized in consultation with the Auditor General and the Attorney General:

1. Issuance of Treasury Bonds during the period from 01 January 2002 to 28 February 2015 by the Public Debt Department

2. Primary and secondary market transactions of the Employees’ Provident Fund involving Treasury Bonds issued/transacted during the period from 01 January 2002 to 28 February 2015

3. Transactions of the Employees’ Provident Fund from 01 January 1998 to 31 December 2017 in listed and unlisted equities

4. Issuance of Treasury Bonds and remittance of funds received to the General Treasury during the period from 01 February 2015 to 31 March 2016 by the Public Debt Department

5. Conduct of the supervisory and regulatory role by the Superintendent of Public Debt/Director, Supervision of Non-Bank Financial Institutions pertaining to selected Primary Dealers from 01 January 2009 to 31 December 2017

It was initially expected that all FAs would be completed by mid-October, 2019. However, the terrorist attacks in April 2019 and challenges faced in the gathering of some important information, some of which were from external sources, resulted in extensions having to be granted. All 5 FAs have now been completed and the final reports have been submitted to the Monetary Board by the auditors.

Given the nature of findings, the Monetary Board sought the opinion of the Attorney General about the distribution of the FA reports including, specifically, as to whether the reports should be made public.

The Attorney General has opined that the findings in the reports, annexes and exhibits should be treated as having the potential to be evidence in investigations and ongoing and future legal actions and access should be limited to those who have statutory authority to access them while emphasizing that the recipients maintain confidentiality in respect of the contents of the reports in order to avoid any possible prejudicial effect on investigations and ongoing and future litigation. The Attorney General has further informed that once the reports and related documents have been fully considered, any extracts thereof which can be disseminated in the public domain without prejudice to investigations and ongoing or future litigation will be notified to the Central Bank.

The public are hereby informed that the Monetary Board will act in accordance with the advice given by the Attorney General.

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Sri Lanka stocks end steady after CB held policy rates steady; turnover slumps to over 2-wk low

ECONOMYNEXT – Sri Lanka stocks closed steady on Thursday (18) with turnover slumping to more than two-week low after the central bank held the key policy rates steady, dealers said.

The main All Share Price Index (ASPI) edged up 0.04% or 3.22 points to 8,910.57. On Tuesday, it fell from its highest
close since March 30.

“We saw the market stabilizing after slipping for the last two days on profit taking,” a top analyst said.

“But overall there was continued buying interest on the energy sector and in addition, we saw buying coming into the plantation-related stocks and their holding companies.”

There had been selling pressure on the banking sector, he said.

At the monthly policy review meeting held today, the central banks kept the rates unchanged.

Market analysts said investors have been looking for profit taking after the index gained nearly 2,000 points in the 12 consecutive sessions through Monday.

Investors, however, have been shifting from top liquid shares to energy and plantation sectors now, analysts said.

The market generated 2.72 billion rupees in turnover, its lowest since August 3 and less than this year’s average daily turnover of 3.13 billion rupees. This is also the lowest turnover in last nine sessions.

Sri Lanka has already declared sovereign debt default on April 12 this year and failed to pay its first sovereign debt in May amid a deepening economic crisis which later turned into a political crisis and led to a change in the president, cabinet, and government.

The more liquid S&P SL20 index ended 0.52% or 15.33 points up at 2,962.33.

Sri Lanka is facing its worst fuel and economic crisis in its post-independence era and the economy is
expected to contract 7 percent this year.

The main ASPI gained 15.2 percent in August so far after gaining 5.3 percent in July. It lost 9.3 percent in
June, 23 percent in April, and 14.5 percent in March.

The market index has lost 27.1 percent so far this year after being one of the world’s best stock markets
with an 80 percent return last year when large volumes of money were printed.

Net foreign inflow was 83 million rupees on Thursday, but the total net foreign outflow so far this year is 1.09 billion rupees.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

LOLC pushed the index up, closing 3.4 percent firmer at 589.3 rupees a share.

Sri Lanka Telecom closed 24.9 percent up at 42.2 rupees a share, and Dipped Products slipped 5.5
percent to 44.3 rupees. (Colombo/Aug17/2022)

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Sri Lanka rupee, yields in govt securities slightly changed

ECONOMYNEXT – Sri Lanka Central Bank’s guidance peg for interbank transactions weakened on Thursday (18) and yields in Treasury bonds picked up slightly while in T-bill edged down in dull trade after the central bank kept key monetary policy rates steady, dealers said.

On Thursday, before the market opened, the central bank held its key policy rates steady at 15.50 percent, while data showed market interest rates are close to twice the rate of them while private credit and imports falling as a consequence.

The central bank is injecting 740 billion rupees of overnight money to banks at 15.50 percent, which were originally injected mostly after reserves were sold for imports (or debt repayments) to artificially keep down rates (sterilized interventions), effectively engaging in monetary financing of imports.

The injections (sterilizing outflows) prevent the credit system from adjusting to the outflows and encourage unsustainable credit without deposits, which is the core problem with soft-pegged central banks, triggering a high rate and an economic slowdown later.

A bond maturing on 01. 06. 2025 closed at 27.90/28.00 percent, slightly up from 27.75/90 percent on Wednesday.

The three-months bill closed at 28.30/29.25 percent, down from 29.25/30 percent on Wednesday.

Sri Lanka’s central bank announced a guidance peg for interbank transactions weakened by one cent to 360.97 rupees against the US dollar on Thursday from 360.96 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 367.97 and 370.00 for small transactions.  (Colombo/ Aug 18/2022)

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Japan grants medical equipment worth 500-mn yen to Sri Lanka govt hospital

ECONOMYNEXT –  The  Japanese government has granted medical equipment worth 500 million Japanese yen to the Sri Jayawardenepura government hospital to improve the hospital’s treatment facilities under Japan’s Non-Project Grant Aid Programme.

A statement by the Department of External Resources said the grant was given in response to a request by Sri Lanka’s government.

Under the 500 million Japanese yen (approximately 1,265 million rupees) grant assistance, angio-CT machine, other radiology equipment, ophthalmic instruments, surgical instrument sets (stainless steel with satin finish), 15 dental units with accessories, liver transplant instrument sets, and a cardiac catheterization laboratory will be provided, a statement said on Thursday August 18.

Sri Lanka due to its worst economic crisis in its post-independence history is currently facing shortages of essential medicine, non-essential and lifesaving medicines pressuring the health sector to only attend to emergency cases to preserve available limited medicine stocks.

On Thursday at the policy rate announcement media briefing by the Central Bank of Sri Lanka (CBSL), Governor Nandalal Weerasinghe said, with the strict measures taken in the recent past, Sri Lanka is currently managing the limited forex income coming into the country to purchase essential goods such as fuel and medicine.

Sri Lanka has received various grants from several countries including China and India which gave a 200 million US dollar credit line to purchase medicine from India.

In June, Minister of Health Keheliya Rambukwella said there is no shortage of vital medicines in the country and all medicines will be restocked by August 2022. However, shortages of medicine aer still being reported in various hospitals islandwide.

“This improvement at the hospital will facilitate the enhancement of the quality of the care provided especially to the patients with non-communicable diseases while enabling high quality medical professional training to medical undergraduates and postgraduates from the National School of Nursing at the aculty of Medical Sciences of the University of Sri Jayawardenepura,” the External Resources Department statement said.

“This project will eventually assist the development of human resources of the health sector in Sri Lanka,” it said. (Colombo/Aug18/2022)

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