Has CBSL Facilitated Another Scandal ? – Arbitraging & Increase In Money Supply
By Hema Senanayake –October 9, 2016
Hema Senanayake
The country must be unified to stop paying homage to political leaders elected to power or thrown out of power. They must be respected for what they have done or what they have been doing for the country. The character of the nation must be to stand up against any wrong doing professes by any leader. It is because of this character that Mr. Arjuna Mahendran had to leave the office of Governor of the Central Bank of Sri Lanka (CBSL) even though Prime Minister Ranil Wickremesinghe strongly stood by him.
CBSL which is erroneously listed under the purview of Prime Minister is on the spot light again. As a result, P.M. himself is under the same spot light. It may be true that Prime Minister is clean but it has no meaning if his professional judgement is wrong in administering the institutions which comes under the purview of the Ministry. Out of those institutions which come under his purview, the central bank is the most important one. Here, in this article, we are going to investigate a serious monetary mismanagement done by the central bank under the watch of Prime Minister.
Arjuna Mahendran
Previously, it was about a bond scandal purportedly done under the watch of Governor Arjuna Mahendran byPerpetual Treasuries Limited(PTL) of which the main man was the son-in-law of the former GovernorArjuna Mahendranhimself. This time it was again about PTL abusing the temporary payment settlement mechanism of CBSL in order to boost the company’s profit. There is nothing wrong if a company tries to increase its profits. But it is wrong if CBSL happens to be a partner in helping any primary dealer like PTL or even a commercial bank to make undue profits jeopardizing the monetary system. All these have now been revealed by a leaked internal document of CBSL.
In the year 2015, PTL posted a profit of Rs. 5.1 billion and it is an increase by 430% in compared to the previous year. Auditor General has once again confirmed that the government has incurred a loss amounting to Rs. 1.6 billion from the most infamous bond scandal by accepting bids of PTL with higher interest rates. In general some body’s loss is somebody else’s profit. If the government lost money, PLT would have made undue profit. Most of the rest of the PTL profits might link to the abuse of CBSL payment method set up for the primary dealers. Earning undue profit is a point that people should concern, but the nation must have a bigger concern if such practice leads to the gross mismanagement of monetary system. I think it has happened. Let us investigate it.
