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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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CJ urged to inquire into AKD’s remarks on May 25 court verdict

Published

38 mins ago

2026/05/5

Sahan Weerasooriya

CJ Surasena

‘Bar Association must reveal its stand’

Civil society group ‘Free Lawyers’ has requested Chief Justice Preethi Padman Surasena to probe whether political pressure was brought on a Magistrate, or a High Court Judge, in respect of an ongoing high profile case.

Speaking to The Island on behalf of ‘Free Lawyers,’ Rajith Keerthi Tennakoon said that they felt the urgent need to seek the CJ’s intervention, following the May Day declaration by President Anura Kumara Dissanayake that the verdict of a case that was heard on 30 April would be given on 25 May. Tennakoon said that addressing the NPP’s main May Day rally at Maharagama, the President asked the people to be ready to celebrate that verdict. The President couldn’t have said so if he hadn’t been aware of the impending verdict, Tennakoon said, while emphasising the responsibility on the part of the Bar Association to state its position on the issue.

‘Free Lawyers’ recently captured pubic attention following its exposure of the theft of USD 2.5 mn from the Treasury.

Responding to a query, Tennakoon said that on behalf of ‘Free Lawyers,’ Maithri Gunaratne, PC, on Monday, 4 April, wrote to both CJ Surasena and President of the Bar Association Rajeev Amarasuriya.

Alleging that President Dissanayake’s declaration caused immense harm to the independence of the judiciary and raised controversy over the judgement that would be given on 25 May, ‘Free Lawyers’ organisation also asked the CJ to inquire into whether the entire judicial process was under political pressure.

Tennakoon said that they expect the Bar Association to reveal its position on President Dissanayake’s statement. Tennakoon pointed out that during the May Day address, President Dissanayake made reference to 15 cases that were to be taken up during this month, whereas Transport, Highways and Urban Development Minister, as well as Leader of the House Bimal Rathnayake, mentioned nearly 10 names of politicians, both sitting and former lawmakers, to be summoned beginning, May.

Tennakoon said that the NPP appeared to have used May Day to counter growing accusations over the Colombo port container controversy, coal scam, Rs 13.2 bn NDB fraud and theft of USD 2.5 mn from the Treasury and USD 625,000 from the Sri Lanka Postal Service.

By Shamindra Ferdinando

News

ITAK MPs representing East take their woes to Canadian HC

Published

41 mins ago

2026/05/5

Sahan Weerasooriya

The Canadian High Commissioner to Sri Lanka and the Maldives, Isabelle Martin over the last weekend met representatives of the Ilankai Tamil Arasu Kachchi (ITAK) in the East. Tamil Guardian reported that talks focused on the challenges facing the Tamil people.

The meeting was held at the office of ITAK Member of Parliament Kaveendiran Kodeeswaran and brought together parliamentarians representing the Batticaloa and Ampara districts, alongside local government officials including divisional council chairpersons.

Discussions centred on a range of pressing issues, including livelihoods, access to education, employment opportunities and ongoing human rights concerns, as well as the broader state of democratic governance in the region.

High Commissioner Martin sought updates on prevailing socio-economic conditions, particularly the challenges confronting local communities in the East. She noted the concerns raised and indicated that she would follow up on the matters discussed.

Among those present were ITAK MPs Kaveendiran Kodeeswaran, Gnanamuthu Sirinesan and Dr Elayathamby Srinath, along with several local council representatives.

News

People demand release of Keppapilavu land

Published

42 mins ago

2026/05/5

Sahan Weerasooriya

A section of the protesters

A section of residents of Keppapilavu, in Mullaitivu, on May Day protested. demanding the release of lands still occupied by the military, 17 years after the end of the armed conflict.

They reiterated their longstanding demand for the return of lands seized by the military, in 2009, to establish a camp, sources in the North said. For over 17 years, Keppapilavu residents have sustained a continuous campaign of protests, petitions and advocacy efforts, calling for the right to resettle on their original lands, they said.

Despite limited releases under successive governments, protesters stressed that substantial areas remain under military control. They highlighted that 171 acres were yet to be returned, including 59.5 acres of residential land and 111 acres of agricultural land. The residential areas once supported over 55 families and included homes, schools, places of worship and shared community spaces.

Holding placards and chanting slogans, demonstrators said that their struggle extends beyond land ownership, framing it as a fight for dignity, livelihood and the restoration of a community life disrupted since 2009.

Residents declared that since the current government assumed office, multiple appeals have been made through formal channels, including submissions to the Presidential Secretariat and the Mullaitivu District Secretariat. However, they stated that these efforts have yielded no meaningful progress toward the release of the remaining lands.

Protesters called on Sri Lankan and the local authorities to take immediate and concrete steps to return the entirety of the occupied land, enabling displaced families to resettle and rebuild their lives without further delay.