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CB Governor says he preferred to avoid domestic debt restructuring

Published

3 years ago

2023/07/8

Thilina Walpola

CBSL Governor Dr. Nandalal Weerasinghe flanked by senior officials

By Rathindra Kuruwita

Ghas said that it was still his position that it is better if Sri Lanka could avoid restructuring its domestic debt.Dr. Weerasinghe, addressing the media, at the Central Bank on Thursday, said that the CBSL position was that because of high inflation, the country’s domestic debt had undergone restructuring in a way.

“At that time, we felt that there was no need to restructure domestic debt because that had already happened as a result of inflation. I still say it is better if we can avoid restructuring our domestic debt because it is already restructured.” He said that position had been changed due to the ongoing negotiation process,” he said.

Once the President of Sri Lanka reached a staff-level agreement with the IMF, the country was committed to sovereign debt sustainability. The country has agreed to certain debt targets for the next 10 years.

“When we ask our external creditors to make a significant contribution and take a cut, the external creditors want some more contributions from domestic lenders. This is a process of negotiations. There are two choices: you can hold on to a position and get nothing done, or compromise and get things done. We compromised while protecting the interests of the Central Bank,” he said.

Market interest rates have already declined in response to measures already taken to ease monetary conditions, Dr. Weerasinghe said.The interest rates on Treasury bonds issued by Sri Lanka were high in the past few years, but the rates have been coming down. The rates were high because of the uncertainty in the country.

“Last week, the interest rates of Treasury bonds touched the policy rates, just below 14 percent. As we have always said, the uncertain premium would collapse if there was stability and clarity about domestic debt restructuring,” he said.

When questioned by a journalist why the CBSL had sold Treasury bills on Thursday (06) worth over 130 billion rupees well above the policy rate, the Governor said that it had been a weekly bond auction to meet government expenditure requirements.

“We can’t decide on government cash flow operations and delay cash flows, anticipating policies to take effect. This amounts to market manipulation. If the government wants, it can ask us not to raise funds right now. Can the government wait, expecting interest rates to go down?” he said.

Dr. Weerasinghe said that in the future, the interest rate structure would return to normal with benchmark rates moving closer to policy rates.

“We hope that the rates will normalise so the economy will benefit. We will not hesitate to take on more administrative tasks to make sure this happens,” he said.

The Governor said that financial institutions had brought down interest rates on credit cards by 2 percent.

“We want to see rates for lending, especially for Small and Medium enterprises, lower faster,” he said.

The Governor said that with the drop in interest rates of Treasury bills, EPF would have to look at alternative investments. The EPF was able to make significant investments because there was a lot of demand for funds from the government, he said.

“Going forward, medium and long term investments strategies have to change for such funds,” he said.

The Governor also dismissed allegations that the EPF would lose 12 trillion rupees by 2038 as the government had decided, in the domestic debt restructuring proposals, only to pay an interest rate of nine percent instead of the average market rate for Treasury bills, which is 13.5 percent.

“Those assessments misrepresent the facts, figures, and reality. The argument is that the average interest payment for Treasury bills is 13.5 percent. I don’t know how that number even came up. However, EPF’s average yield on their medium and long-term fund is 11.5 percent. That’s why EPF paid nine percent interest to its beneficiaries,” he said.

Those who claim the EPF will lose 12 trillion rupees by 2038 assume that 13.5 percent interest can be made from investing Treasury bonds until then, he said.

“The inflation must be around 15–18 percent until 2038 to ensure a 13.5 percent interest rate for Treasury bonds. So, obviously, these are manipulated numbers. The assumption is that our debt will not be sustainable,” Dr. Weerasinghe said.

The Governor said that the Central Bank was responsible for the stability of the financial system, the Central Bank balance sheet, and being the custodian of the EPF.Dr. Weerasinghe said that the markets and international rating agencies had responded positively to domestic debt restructuring.

“We have finalised domestic debt restructuring, and this is important when it comes to dealing with foreign creditors. We are also having discussions with them. The discussions with the Paris Club are on. We have shared data analysis and proposals. We are making progress on the bilateral discussions with non-Paris Club countries like China. Discussions with Chinese banks are ongoing. When it comes to ISB holders, we had several rounds of discussions. Our advisor, Lazard, is conducting discussions with them. We hope that this process will make progress. We would like to expedite the process and reach agreements with both bilateral and ISB creditors before the first IMF review. This is our first objective,” he said.

The IMF, ADB and World Bank have approved another 900 million dollars in the near future, he said.

The Governor added that imports had stabilised at around 1.4 billion dollars a month. Exports stand at around 1 billion dollars. There is a gap of about 400 million dollars between the two.

“We can fill the gap with our worker remittances and tourism. There can be a balance. Even if imports go up to 1.6 or 1.7 billion dollars, we have a buffer,” he said.

Sri Lanka has already met the reserve levels agreed with the IMF. This will give investors more confidence and strengthen their ability to intervene in the market.

“All targets, except revenue targets, have been met. That’s because import tax collection was low due to lower imports. This is why we have recommended that the government relax import restrictions so that they can collect revenue. Value Added Tax and Income Tax are in line with expectations,” he said.

What import restrictions were relaxed and when that would be done would be decided by the Ministry of Finance, Dr. Weerasinghe said. The Central Bank had recommended relaxing restrictions on about 900 items, he added.

“Restrictions on about 300 items, including motor vehicles, remained,” he said.Sri Lankan economy would grow by the end of 2023, the Governor added. The economy contracted in the first two quarters of 2023.

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Removing monk’s robes matter for Sangha to decide: Mahanayake Theras

Published

9 hours ago

2026/10/9

Thilina Walpola

Ven. Gnanasara

The Mahanayaka Theras of all Nikayas have protested against Bodu Bala Sena (BBS) General Secretary Ven. Galagodaaththe Gnanasara Thera, who is serving a prison sentence for contempt of court, being produced before court in civilian attire.

In a letter to the Commissioner General of Prisons, the Mahanayaka Theras have said they were surprised and concerned by the decision to remove the monk’s robes.

The letter has been signed by Most Ven. Thibbotuwawe Sri Siddhartha Sumangala Thera of the Malwatu Chapter, Most Ven. Warakagoda Sri Gnanarathana Thera of the Asgiri Chapter, Most Ven. Karagoda-Uyangoda Maithri Murthi Thera of the Amarapura Maha Nikaya and Most Ven. Makulawe Sri Wimala Thera of the Ramanna Maha Nikaya.

The Mahanayaka Theras have said they respect the Constitution and the judicial process, but maintained that removing a monk’s robes or ending his status as a member of the Buddhist Order is a matter that should be decided by the Maha Sangha.

They have said the relevant Sangha Council has not determined that Ven. Gnanasara Thera committed a Parajika offence or any other offence warranting his removal from the Buddhist Order.

The Mahanayaka Theras have also referred to Regulation 550 of the Prison Standing Orders, which they say stipulates that convicted prisoners should not be taken to court in prison uniform and should be allowed to wear the type of clothing they normally wore before their conviction. In the case of a Buddhist monk, they have said, this means his monastic robes.

They also referred to the United Nations Standard Minimum Rules for the Treatment of Prisoners, which provide for prisoners taken outside prison to be allowed to wear their own clothing or other unobtrusive clothing.

The Mahanayaka Theras have requested the Commissioner General of Prisons to allow Ven. Gnanasara Thera to wear his robes when appearing in court and to maintain his status as a monk while he remains in prison.

Prisons authorities have said that the clothing decision was made under prison regulations, and the Prisons Department has stated that prisoners serving sentences of more than three years are required to wear prison-issued clothing when produced before court.

News

NDB fraud Rs 60mn more than reported

Published

9 hours ago

2026/10/9

Thilina Walpola

The Committee on Public Finance has said that the actual losses suffered by the NDB bank are much more than what was initially reported. When compared with the initial disclosure made by NDB on 6 April 2026, the reported amount of the fraud had increased by Rs. 0.4 billion, from Rs. 13.2 billion to Rs. 13.6 billion, the committee said.

When compared with the amount disclosed by NDB on 26 June 2026, based on the interim report dated 22 June 2026, the additional amount of fraud is Rs. 60 million.

The has committee issued the following statement: The Committee on Public Finance recently summoned officials of the Central Bank of Sri Lanka to Parliament to inquire into the financial irregularities identified at NDB Bank and the final audit report relating to the matter.

The Committee meeting, chaired by Member of Parliament Dr. Harsha de Silva, discussed irregularities identified in NDB Bank’s financial statements, shortcomings in the audit process, and the relevant audit reports.

The meeting was attended by Deputy Ministers Chathuranga Abeysinghe, Dr. Kaushalya Ariyaratne, and Nishantha Jayaweera, as well as Members of Parliament Attorney-at-Law Rauff Hakeem, Ravi Karunanayake, Ajith Agalakada, Nimal Palihena, Wijesiri Basnayake, M.K.M. Aslam, Champika Hettiarachchi, and Attorney-at-Law Lakmali Hemachandra.

The Committee also focused on the findings of the investigation conducted by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAAMB), as well as the findings revealed through the investigation conducted by Deloitte Touche Tohmatsu India LLP. In particular, the Committee inquired into the failure of the external auditors to identify irregularities in NDB Bank’s financial statements.

The accountability of senior management with regard to corporate governance and risk management in relation to the financial irregularities was also discussed.

As a significant proportion of NDB Bank’s shares are held by institutions representing public and state funds, the Committee also considered the potential impact of such financial irregularities on public funds and the general public.

The Committee also discussed the progress made by LankaPay in establishing a centralized fraud monitoring system to prevent fraud within the financial system. The need to strengthen fraud monitoring systems at the individual bank level to monitor transactions carried out within each bank was also emphasized.

Accordingly, the following observations are included in the final audit report concerning the financial irregularities at NDB Bank:

1. The audit covers the period from 1 April 2016 to 31 March 2026. The audit report specifically identifies the financial impact arising from fraudulent transactions amounting to Rs. 13,639,664,684 (Rs. 13.6 billion).

2. According to the disclosure made on 29 September 2026, the financial impact arising from the fraudulent transactions is as follows:

· Rs. 1.5 billion for the period prior to 1 January 2025;

· Rs. 9.6 billion during 2025; and

· Rs. 2.5 billion for the quarter ended 31 March 2026.

3. Compared with the initial disclosure made by NDB on 6 April 2026, the reported amount of the fraud has increased by Rs. 0.4 billion, from Rs. 13.2 billion to Rs. 13.6 billion. Compared with the amount disclosed by NDB on 26 June 2026, based on the interim report dated 22 June 2026, the additional amount of fraud is Rs. 60 million.

4. The final audit report has also confirmed the previous disclosures that no customer accounts were affected as a result of the fraud incident.

5. The report has identified several governance failures at NDB relating to the processing of CEFT transactions, user-level activities within the Core Banking System, and the management of user credentials and access information. In addition, shortcomings have been identified in several operational areas, including transaction monitoring, daily account reconciliation, financial compliance, internal audit, branch network management, and operational risk management.

The audit report has made comprehensive recommendations to strengthen the control mechanisms, governance structures, and processes relating to the above-mentioned activities of the bank.

News

President orders review of laws on treatment of imprisoned monks

Published

9 hours ago

2026/10/9

Thilina Walpola

President Anura Kumara Dissanayake has ordered the formation of a committee to review the laws and regulations on how Buddhist monks serving prison sentences are treated, including the procedures that apply when they are taken out of prison.

He revealed this at a special meeting with Maha Sangha representatives held yesterday (8) at the Presidential Secretariat. The meeting was called after concerns were raised over how Ven. Galagoda Aththe Gnanasara Thera was treated when he was taken from prison to court.

The committee will recommend amendments to existing laws and, where needed, new prison standing orders and regulations. Its members will be drawn from the Attorney General’s Department, the Ministries of Justice, Public Administration, and Buddha Sasana, Religious and Cultural Affairs, and the Department of Prisons, including the Commissioner General of Prisons. It has been given two weeks to review the current legal provisions and submit its recommendations. The President added that any changes specific to Buddhist monks would be made in consultation with the Maha Sangha.

Outlining the legal background, the President said prison administration was governed by the Prisons Ordinance of 1877, along with the regulations and standing orders issued under it. That framework mostly addressed prisoners in general, he said, and had few provisions dealing specifically with Buddhist monks.

The meeting was attended by senior Maha Sangha members representing the Siyam, Amarapura and Ramanna Nikayas, along with Minister of Buddhasasana, Religious and Cultural Affairs Hiniduma Sunil Senevi and Minister of Justice Harshana Nanayakkara.