The illusive rescue of the rupee by an elusive -Belgian investor: Is the Yahapalana -Government on the wrong track? 

An elusive Belgian investor to rescue the rupee

Monday, 18 January 2016

According to Reuters, Finance Minister Ravi Karunanayake is reported to have disclosed that an unidentified Belgian investor has promised to give Sri Lanka $ 1 billion by way of a deposit carrying an interest rate of 2%. 

The minister has opined that it would boost the value of the Sri Lanka rupee which is under pressure for depreciation quite for some time (available at: http://www.ft.lk/article/518680/--1-billion-mystery-investor-boosts-rupee). Without disclosing the full facts, several features relating to the transaction in question have also been revealed by the minister.

Accordingly, there is a local partner to the Belgian investor, it is a kind of a demand deposit from which the investor could take his money out at any time, the first tranche of the deposit amounting to $ 500 million has already been received and the balance will come shortly. The minister has said that if anyone suspecting potential money laundering in the transaction in question can seek the courts’ intervention for a determination as to whether it would violate existing laws. 

But an officer of the ministry, according to the Reuters report, appears to have given a firm judgment on the issue obviating the necessity for even seeking legal intervention. He is reported to have opined that it is the responsibility of the money-remitting bank to check on the credentials of the investor in question. The money receiving bank in Sri Lanka or, by implication, the Sri Lankan authorities have nothing to do with that issue. 

This is an awkward legal opinion because it discharges, contrary to the common banking and legal practices, a third party from liability if he has accepted a stolen property – say a cheque – on the basis of a certificate issued by the second party about its genuineness. 

Hence, it is a transaction that has been sealed by a sovereign government. Strangely, the Central Bank has so far maintained stoic silence on it implying that it too has concurred with the seemingly out of the box move to build up the reserves of the country. 

An unconventional move by the Finance Ministry to rescue the rupee 

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