EDITORIAL - CB gets first no-ball

8 March 2015 07:44 pm Views - 5749

rrant and corrupt politicians who surrounded Mahinda Rajapaksa was the immediate reason for his election loss. Unlike other instances, it was not Rajapaksa as the President, who became unpopular among the people, but his government.  
In J.R. Jayewardene’s case, it was Jayewardene people detested.  It was the same with Premadasa and CBK. But the number of people who still visit the Carlton House in Tangalle to meet and greet Rajapaksa shows this was not the case for him.  Apart from the crony politicians that surrounded him, on whose tainted actions Rajapaksa didn’t take any action, there were several other public officials who were also responsible for his fall.
Chief among them were the Treasury Secretary Dr. P.B.Jayasundera and the Central Bank Governor Ajith Nivard Cabraal.   Many say the actions of these two helped to change the public perception about Rajapaksa.  Jayasundera wielded powers only second to The Rajapaksa clan.  That may have been the reason why even the extremely loyal parties, who are still trying to bring back Mahinda Rajapaksa, labeled Jayasundera an economic hitman.  Meanwhile, Cabraal was a trendsetter.




He set a new benchmark making the Central Bank politicised to previously unfathomable levels. His name was also tainted with scandals such as the Greek bond fiasco, hedging deal and numerous EPF deals.  The Janatha Vimukthi Peramuna has filed case against him at the Bribery Commission. It was in this backdrop, international banker Arjuna Mahendran was appointed as the Central Bank Governor by the new administration of President Maithripala Sirisena and Prime Minister Ranil Wickramasinghe.  However, cases of conflict of interests were cited against Mahendran as his son-in-law was connected to a primary dealer firm.





According to Mahendran, his son-in-law resigned from the directorship of the primary dealer firm Perpetual Treasuries to make way for his appointment.  But less than 50 days to his appointment, a massive scandal erupted.  Allegations have mounted that Perpetual Treasuries made unfair gains at a recent 30-year government bond sale, allegedly on inside information.  Amid pressure from various quarters, the Ministry of Policy Planning and Economic Affairs issued a koheda yanne malle pol (folksy Sinhalese way of referring to a non-sequitur) media statement.  It justified the Treasury Bond issuance—which is no surprise as the government is cash-strapped—but didn’t give a rational explanation as to why the bond issue size was raised by 1000 percent.
According to money market dealers, the Central Bank has been in the habit of upsizing the bond sale size, but not in this proportion.  Our sister paper the Sunday Times reported that the primary dealer in question had bid for Rs.3 billion, whereas the Central Bank initially announced to raise Rs.1 billion.  At the same time, the justification given for the sudden spike in the yield from 9.5 percent to 12.5 percent in the press statement was lame.




And how Perpetual Treasuries got the yield spike spot-on, remains even a bigger mystery.  Another action of questionable nature was why the Central Bank didn’t lift the cap on banks’ parking their excess money with the Central Bank in the monetary policy review—which is likely to be the norm—but only a few days after releasing the policy review?  According to the press statement, the lifting of this cap resulted in the interest rates going up.
The press statement also blamed the previous government of cartelising means of money making by people connected to Rajapaksas.  It further charged Rajapaksa government cronies carrying out pre-arranged transactions and having access to vital information.
The only thing public may have to say in response is, that is why we got rid of Rajapaksas and elected your government.
The country doesn’t want any more Cabraals or Jayasunderas. Incidents of this nature will not help the enormous task of rebuilding the integrity of the Central Bank or any other public institution.  Until a proper investigation is carried out into the matter and perpetrators are punished, this scandal is sure to haunt the yahapalana government in the coming elections.