ECONOMYNEXT – Prime Minister Ranil Wickremesinghe told the bond commission Monday that the former regime had kept big-ticket government expenditure out of the budget to project a robust balance sheet to the International Monetary Fund.
Defending his decision to scrap the system of private placements and go for public auctions of bonds, Wickremesinghe said it was difficult to assess the actual cash needs soon after coming came to power in 2015.
He said even a week ago, the government was confronted with an unspecified bill from a Singaporean company which had carried out road construction work between 2013 and 2014.
The government still kept getting claims for work carried out during the former regime and there was no record of these liabilities and no provision had been made in the appropriation bill.
The Prime Minister said about 500 to 600 million had been obtained from banks (he did not name them) and warned that failure to meet those debts could cause severe stress in the banking sector.
The Presidential Commission of Inquiry to Investigate and Inquire into the Issuance of Treasury Bonds wound up its sittings after Wickremesinghe's testimony which lasted just over an hour.
The Commission's Chairman, Supreme Court Justice K. T. Chitrasiri thanked the premier for readily agreeing to attend the hearing and noted that there was question of compelling him.
Justice Chitrasiri referred to answers the premier had provided by way of two affidavits. He sought clarifications on a projection of 13.5 billion rupees required by March 2, 2015 and an additional requirement of 15 billion rupees determined at a meeting held a few days before the February bond auction.
Wickremesinghe said these were two separate requirements. The Premier went onto say that only in 2017 the government was able to make a proper assessment of its debt commitment and put in place a new system of bond sales with the help of an expert from the US Treasury.
He said the previous government kept many payments out of the budget so that it could meet the limits set out by the International Monetary Fund.
“They got around these IMF limits by not including them in the budget,” he said. “We actually had two streams of payments to meet. One is what is in the Appropriation Bill and the other one was outside that.”
Attorney General Jayantha Jayasuriya who had been summoned by the commission to lead the Prime Minister’s evidence, asked about Joint Opposition member Mahindananda Aluthgamage's allegations in parliament against the then finance minister Ravi Karunanayake.
The Prime Minister said he raised the issue with the finance minister who denied it.
Wickremesinghe put the ball back in the AG's court by asking what he had done with a corruption investigation file on Aluthgamagage sent to the AG's department to decide whether to prosecute him or not. The remark raised laughter, but no response.
Wickremesinghe was asked if he was aware that Arjun Aloysius was a director and shareholder of Perpetual Treasuries Limited (PTL) to which he said “yes”.
The prime minister said he had made it clear to Mahendran when he was given the job that it would be a conflict of interest to have his son-in-law as a primary dealer and that he should step down and divest his shares in PTL.
Asked by commission chairman Justice Chitrasiri if he was aware that Aloysius continued to be a director and a shareholder of PTL's owning company even after 2015, Wickremesinghe said “No, I am not aware.”
He said Aloysius had wanted time to dispose of his shares, but did not specify a time period.
He was questioned at length about his decision to scrap private placements of bonds and if the central bank's Monetary Board had approved such a move. Wickremesinghe said he expected Governor Arjun Mahendra to have followed due process.
Besides, Mahendran and a second member of the Monetary Board, the Secretary to the Treasury, had been told of the government's policy to move towards a transparent auction system.
He was also asked about four telephone calls with Mahendran and the Prime Minister said he could recall them. “I can remember. He did tell me not to worry and that there is enough money raised (at the bond auction).”
Mahendran had later telephoned him to give details of the bond action and also inform him that 10.5 billion rupees had been raised at the auction (COLOMBO, November 20, 2017)