ECONOMYNEXT – Sri Lanka’s rulers are once again trying to target two pension funds made up of money from private sector workers, a media report said, with attempts for the Treasury whose interests are directly opposed to those of the beneficiaries.
The Employees Provident Fund, is now managed by the Central Bank and Employees Trust Fund by a separate board. But the both the agencies have come under fire for using it as a ‘captive source’ for to give low interest loans to the Treasury.
Cat asked to look after fish
The interests of the Treasury, which is seeking low interest loans is diametrically opposed to that of the members of the EPF and ETF, who want market rates for their savings, which generates a situation similar to asking a cat to look after fish, analysts say.
The Central Bank also sells debt for the Treasury, generating a conflict of interest, similar to asking a cat to look after fish.
The new administration came to power promising to place the pension funds under independent management, but also attempted to create an annuity (a long term pension) keeping the money with the government for longer period.
No mention was made of an independent agency to manage the funds.
With an ageing population the EPF, outflows are expected to overtake inflows in the future and the state is wants to keep the money in the fund for a longer period.
The Sunday Times newspaper said several proposals were being considered, including releasing the EPF money in stages instead of a lump sum, and starting a contributory pension fund.
Following the so-called bondscam where pumped up bonds were dumped on the EPF, confidence on the authorities are low. During the last administration stocks were alleged to have been pumped and dumped on the EPF.
However analysts say, much hope is placed on the new Central Bank Governor Indrajit Coomaraswamy, whose integrity is unquestioned.