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Governance issues, etc., will have to be sorted out to avert further debt restructuring: Verité Research

Published

3 years ago

2023/07/7

By Rathindra Kuruwita

Unless Sri Lanka addressed its governance issues, the country would have to restructure its debt again like most countries that had unsustainable levels of corruption, Executive Director of Verité Research Nishan de Mel said in a recent televised interview.

Dr. De Mel said that as the government had decided to pay the Employees’ Provident Fund (EPF) only 9% for its investment until 2038 instead of the average Treasury bond interest rate of 13.5 percent, it would lose 12 trillion rupees.De Mel also said that Domestic Debt Optimization (DDO) was a phrase that the Sri Lankan government coined.

“Domestic debt restructuring usually means making credit owners take a loss for the benefit of the government. The word commonly used for this is restructuring, optimisation is a word that we have come up with,” he said.

De Mel said that the government’s proposal was to reduce the interest paid on the money at EPF and other such funds to 9.1 percent until 2038. However, the average interest paid for Treasury bonds over recent years was 13.5 percent, which is almost 50 percent more than the proposed interest for EPF, he said.

“We know the interest rates for Treasury Bonds because the government has released information about the interest rates of bonds issued because foreign creditors have been asking for transparency. By the end of 31 May this year, the average interest rate given to bondholders was 13.5 percent,” he said.

There had been years when interest rates for Treasury bills were below 9.1 percent. However, it was unlikely that the interest rates offered on Treasury bills would fall below 9.1 percent, he said. Sri Lanka was going through an uncertain time and governments could only lure people into buying bonds by offering attractive interest rates, de Mel added.

“We still can’t borrow from bond markets. So, the government will offer higher interest rates when it borrows from the domestic market. During the past two years, the government has paid about 30 percent interest to borrow from the domestic market. It is unlikely that interest rates for bonds will be less than 13.5 percent in the future,” he said.

De Mel said that at present there are 3.4 trillion rupees at the EPF, and it will reach about 25 trillion by 2038 at 13.5 percent interest. However, EPF funds would only grow to 13 trillion at 9.1 percent interest.

“That’s 12 trillion rupees less at 9.1 percent,” he said.

The Central Bank had a Monetary Board taking decisions on the EPF and there was a conflict of interest as CBSL was also entrusted with restructuring debt, de Mel said.

“A lot of people ask me why I am using 13.5 percent to calculate the losses. They tell me that the EPF already receives less than 13.5 percent in interest. The EPF is late in producing annual reports. The last available report was for 2020. The Central Bank produces its annual reports every year, but the EPF reports are delayed. There are many allegations about what happened. If someone tells me that EPF receives lower interest rates than the market rate for treasury bonds, that is another serious problem. All private sector employees are compelled to be a member of the EPF, so why are EPF beneficiaries receiving less than market rates?” he asked.

There are several pension funds, and CBSL workers have a special pension fund. De Mel said he was not aware if that pension fund, too, had been restructured.Although the parliament had approved a resolution on the domestic debt restructuring, the government could not change the interest rates given to EPF without changing some laws, he said.

“The laws governing the EPF say that the Central Bank must publish all investments it makes with EPF money. However, when we look at EPF’s financial statements, they have misinterpreted the above clause. Instead of listing out every investment, they are listing out every type of investment. This way, people can’t figure out what’s going on,” he said.

Those who are EPF beneficiaries will lose about 70 percent of the real value of their money because of inflation and the lower market rate of interest. However, foreign investors are only getting a 30 percent loss, he said.

“This is unequal treatment. There are two factors needed for sustainable domestic debt restructuring. One is that foreign creditors must take a deep haircut—over 50 percent. Secondly, the governance issues in a country must be addressed. Most countries have to restructure their debt more than once. And these countries have serious governance issues. So, to attain sustainability, we need foreign creditors to get a deeper haircut and we have to address our serious governance issues,.”

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No PC polls this year, says Tilvin

Published

4 hours ago

2026/05/25

Thilina Walpola

Tilvin

The much-delayed Provincial Council (PC) elections cannot be held this year due to financial and legal constraints, JVP General Secretary Tilvin Silva has said in Jaffna.Silva said so, fielding questions from journalists after the opening of the NPP coordination office in the Jaffna District on Saturday.

When asked whether the government was under Indian pressure to conduct the Provincial Council elections soon, Silva answered in the negative, claiming that Sri Lankan and Indian governments maintained close and friendly relations with a strong level of understanding.

He said budgetary allocations had been made for the PC elections, but the government had been compelled to divert resources for disaster relief following the impact of Cyclone Ditwah. According to Silva, nearly Rs. 500 billion had to be allocated for relief measures, making it difficult to hold the elections this year. He further said legal complications in the electoral reform process had also contributed to the delay in holding the PC elections, noting that a parliamentary committee had been appointed to determine the electoral systems under which the PC polls should be conducted. Once the committee submitted its report and if no further issues arose, the elections could possibly be held next year, he said.

Silva also said the government had taken measures to strengthen reconciliation and development in the North by releasing lands previously occupied by military camps and improving road infrastructure.He added that empowerment initiatives were being implemented under the Praja Shakthi programme and that both Sri Lanka and India were continuing to work in close cooperation.

News

Weather conditions worsen, displacing 31,000 people

Published

4 hours ago

2026/05/25

Thilina Walpola

More than 31,000 people across Sri Lanka have been affected by worsening weather conditions, as the southwest monsoon intensifies ahead of its full establishment, raising fears of renewed flooding in vulnerable low-lying areas, the Disaster Management Centre (DMC) has warned.

The DMC has said 31,072 individuals from 7,983 families have already been impacted by persistent rain, strong winds and rising water levels across multiple districts, with the situation most severe in the Gampaha District where 15,313 people from 3,950 families have been affected and one death reported.

Officials have cautioned that the scale of disruption could worsen as the southwest monsoon is expected to fully establish over the island around May 26–27, bringing heavier and more sustained rainfall to the southwestern region.

At present, 18 safety centres are in operation, sheltering 1,724 displaced persons from 446 families. One person has been injured and 859 houses have been partially damaged. Two houses have been destroyed.

The Department of Meteorology has forecast increased rainfall over the coming days, warning that conditions are likely to deteriorate further as monsoon activity strengthens.

Flood-hit areas remain widespread, with river systems still under pressure despite a brief easing in rainfall on Saturday. The Kelani River has returned to normal levels, but minor flooding persists along the Kalu River basin, particularly in the Millakanda area, where tributary water levels remain elevated.

Low-lying areas in Bellapitiya, Horana, continue to be inundated, while traffic on the Bulathsinhala–Kalutara road remains disrupted due to flooding in Diyakaduwa. Authorities have also flagged continued risk in Putupawula and Ellagawa along the Kalu River.

The Attanagalu Oya basin is also slowly receding, though residents in Dunamale have been urged to remain on alert. Several homes in Ja-Ela remain underwater, with residents alleging that delayed repairs to a damaged canal embankment worsened the flooding.

In a fresh blow to infrastructure, the Swarna Hansa Podi Ela bridge in Ja-Ela collapsed on Saturday evening, further disrupting local transport links, while the main Ja-Ela–Gampaha bus route remains submerged in parts of Yakkaduwa.

Meteorologists have warned that rainfall is expected to intensify again from May 26 to 28, when the southwest monsoon is likely to be formally declared over Sri Lanka, raising the risk of further flooding and landslides in already saturated areas.

by Norman Palihawadane and Chaminda Silva

News

Dickoya double murder suspect arrested

Published

4 hours ago

2026/05/25

Thilina Walpola

Police said a suspect wanted in connection with the murder of an elderly couple inside a shop in Dickoya town, Hatton, had been arrested on Saturday evening (23).

The arrest was made in the Bogawantalawa police area. Acting on a tip-off, the police arrested him while he was hiding in a house on a tea estate.

Police said stolen gold jewellery had been recovered.

Preliminary investigations revealed that the suspect, originally from Badulla, had been residing in Dickoya after his marriage.

Earlier on Saturday, Hatton Police released CCTV footage of the suspect and sought public assistance to trace and arrest him.

According to police, the suspect allegedly slit the throat of the elderly woman and killed her husband using a sharp weapon on Thursday (21) before fleeing with gold jewellery valued at around 18 sovereigns, including a necklace and earrings.

Investigations further revealed that the suspect had arrived in Dickoya town on the morning of May 21 and visited several jewellery shops claiming he intended to purchase a gold necklace, while loitering in the area.

Police said that around 1.15 pm, he entered the couple’s shop and remained concealed inside the premises before allegedly carrying out the attack.

Hatton Police added that the suspect is believed to have committed the murders and left the shop around 5.30 pm the same day before going into hiding.

by Norman Palihawadane