Public Debt Management Bureau to relieve CB from handling bonds

In the wake of infamous bond scam and ever growing public debt, a Public Debt Management Bureau will be set up under the purview of the Finance Ministry separating the institution from the Central Bank (CB) purview, officials said.

The separation of debt and monetary management is aimed adopting professional debt management techniques to save cost and to provide policy signals to the market, a senior Treasury official told the Business Times.

“This development will terminate the past practice of inefficiently managing the country’s debt portfolio, and will instead establish a framework for actively managing the country’s debt,” he revealed.

It will protect the integrity and independence of the CB, ensure transparency and accountability and improve debt management by entrusting the task to portfolio managers with expertise in modern risk management techniques, he said.

The separation would also be helpful for the borrowing programme which would have to be completed without the support of the regulatory or supervisory authority.

Sri Lanka’s domestic and foreign debt securities are now sold and managed by a unit in the CB while foreign loans are raised by the External Resources Department of the Finance Ministry.

The bond scandal has proved that the prevalent system of debt management by the CB is outdated and it needs professionalism, a veteran economic expert said.

Burning issues have arisen pertaining to the debt management in Sri Lanka and it has been found necessary to have a single separate institution for this purpose.

A five member Committee on

Public Debt Management will be appointed under the chairmanship of the Treasury Secretary to draft a Public Debt Management Bill and to develop the necessary institutional framework for the proposed Bureau.

The Public Debt Management Bill would seek to consolidate and amend existing laws relating to public debt management and provide a governance framework for the prudent management of government debt activities guided by defined objectives.

Officials familiar with the process said it will facilitate the implementation of the government’s policy reforms under the proposed Sri Lanka competitiveness development policy loan by the World Bank (WB) and Japan International Cooperation Agency (JICA.).

The government should institute a legal framework clearly specifying the objectives of its borrowing and the public debt management strategy, a well-known economist said.

He added that to avoid bond scams this legal framework should consist of both the primary and the secondary bond transaction legislation including the definition of public debt, debt management objectives, and borrowing purposes.

(BS)