AG directed to probe bond deals between 2009 and 2015

The Auditor General has been asked to look into Central Bank bond auctions between 2009 and 2015, analyse the data to ascertain if the due process was followed and report if any malpractice had taken place.

The directive has come from the Finance Minister.

Auditor General Gamini Wijesinghe said his department has already begun the inquiry and a report would be ready within two to three weeks.

The Finance Ministry’s directive comes in the wake of the release of the COPE report on the bond issues. The COPE probe also studied AG's observations of the bond issue. The AG concluded that authorities concerned should be held responsible for the avoidable losses amounting to Rs. 1,674,256,805 in the the details must be made public,” he said.

Mr. Wijesinghe said that In the US details pertaining to bond purchases of up to five years is made available on their websites.

“The total number of bonds, value of bonds should be open information. At the beginning of the year everybody should know what the budget deficit is as that amount has to be obtained from loans for the year. Then you identify the sources from which you are going to raise the loans such as treasury bills, bonds, soft loans etc. and the information should be made public so that people are two bond auctions.

In the February 27, 2015 auction, which became the center of an investigation by the parliamentary Committee on Public Enterprises (COPE), the avoidable total loss has been estimated at 889,358,050 while in the March 29, 2016 auction, the avoidable total loss has been estimated at 784,898,755.

The AG also said he could not rule out the possibility of an increase in the estimated gains or losses relating to other issuance of bonds from February 27, 2015 to May of 2016.

In 2015, there were around 30 bond auctions while in 2016 so far there have been 20.

Meanwhile the AG in his report that was sent to COPE has said that guidelines should be introduced to regulate aware how the monies are going to be raised,” he said.

In the AGs report, he has noted the need for the CB to maintain all necessary data as lack of adequate data in the CBSL for the regulation of the secondary markets results in the inability to regulate the financial markets.

He also said the CB must maintain all information on bonds issued to cover all transactions from the date of issue to the date of producing it to the bank for encashment on maturity.

“Most of the decisions of the CBSL have long term impact on the overall economy and whether such inter-transactions of bonds among primary dealers. He also recommended that the extensions of published date and time of bond auctions should be limited to unavoidable and justifiable matters only unlike the manner in which it is done in some instances at present.

The AG has also said that the Employees Provident Fund (EPF) should be made a primary dealer capable of functioning independently without supervision, as, at present, the EPF shows a tendency to purchase bonds from other primary dealers in the secondary market as an alternative to the purchase of bonds directly from the primary market. The EPF is not a registered primary dealer but is permitted to perform primary transactions and purchase bonds from the primary market at present. important complex and sensitive decisions have been taken on the correct basis should be subject to review by an independent party as the good and bad impact generated by them would be faced by the general public," the report said, adding that such information should not be shielded in the name of safeguarding confidentiality mentioned in Section 45 of the Monetary Law Act and that there is the need to take action to amend this said section in a suitable manner.

Section 45 relates to the duty of CB officials and servants to maintain secrecy.