ECONOMYNEXT – Sri Lanka is considering representation from members of the Employees Provident Fund to its Board, Labour Minister Manusha Nanayakkara said, a day after the Central Bank said the EPF will agree to domestic debt optimization (DDO) despite a disagreement among members of the country’s largest pension fund.
The Central Bank on Thursday informed the members of the 3.4 trillion-rupee worth EPF that it has opted for the government’s DDO option with a long-term view in the best interest of its members.
The fund has 2.6 million contributing members and 17.1 million non-contributing members as of end 2020. The central bank has been the custodian of the EPF.
There has been no representation to the EPF board from the members and no contributor has been informed over past investment decisions.
The central bank in the past has invested EPF money heavily into government securities and justified the decision to members with a return of around 10 percent in the past.
But there was no consent from members for the latest DDO decision, and analysts say there was no process to get some consent because no formal representation is allowed in the EPF Board.
“There should be some decision-making powers for EPF members,” Nanayakkara told reporters on Friday (15).
“This is why we have decided in future… there should be some representation from the members on the board.”
Sri Lanka is forced to restructure its domestic debt before seeking foreign debt restructuring, and the current move with least consent is to speed up the external debt restructuring, government officials have said.
A central bank analysis shows the return on EPF could fall to as low as 6.79 percent if the DDO option was not chosen within the next 12 years as against 8.02 percent if opting for DDO.
Nanayakkara, however, argued that through opting for DDO, the government has protected EPF members in assuring the minimum return for the next 12 years.
“Whether there is a higher return or lower return, we are trying to maintain a stable return for the employees,” he said.
“With the demand for government debt coming down in the future, there will be a declining trend in the interest rates and return. That’s why we are trying to protect.” (Colombo/September 15/2023)