UPFA stifled efforts to raise TB limit - Mahendran

by Zacki Jabbar-July 3, 2015

Governor of the Central Bank Arjuna Mahendran said yesterday that the February issue of 30-year bonds amounting to Rs. 10 billion at 11.73 percent was a direct result of the irresponsible behaviour on the part of a section of the UPFA resulting in bids at lower rates drying up.

Addressing a news conference in Colombo, the Governor said that the UPFA by defeating a Bill presented by the Finance Ministry to raise the limit on the issuance of Treasury Bills had given the wrong signal to the market, resulting in it becoming aware that the government needed funds urgently to meet the increase in salaries to the public sector and also repayments on loans drawn by the previous government at very high commercial rates.

The irresponsible and politically motivated actions of a section of the UPFA had forced the Treasury to resort to the issue of long term bonds at a higher interest to finance government spending, resulting in losses to the country running into several hundreds of billions of rupees,he noted.

Mahendran said that fortunately since the issue of the 30-year bonds more bids had been coming in and they had been able to lower interest rates.

The previous administration had claimed that it was paying lower interest rates on direct and private placements by short changing the Employees Provident Fund, Employees Trust Fund, National Savings Bank etc he said, adding "We will not force any institution whether it is public or private to invest in bonds and Treasury bills. It is unethical and wrong to be playing about with the hard earned savings of workers or state resources, while giving the false impression that lower interest had been paid."

The Governor stressed that the economy evaluated on internationally accepted accounting standards had recovered since January this year with inflation dropping, unlike earlier when manipulated statistics had been floated giving a false impression.