4 December, 2020

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Bonds; Now It’s All Greek To Me

By Mahesh Senanayake

Mahesh Senanayake

Mahesh Senanayake

“It’s all Greek to me” is a famous English idiom which means “difficult or beyond understanding” and it has a greater degree of relevance in the current context of the national debate on the issuance of Treasury Bonds by the Central Bank of Sri Lanka of which one of the responsibilities is to, in simple language, find “money” for the government which in most cases in the form of “debts “. Treasury bond is one such tool used by the central bank for borrowing purposes which is now known to the most of the average Sri Lankan due to the topic being discussed at national level politics. However, the said topic failed to grab the public attention during the past decade except on one occasion where the story was all water under the bridge by the time the Sri Lankan citizen had had the privilege to know what had happened to the public funds as the rulers of at the time was smart enough to conceal the story and hoodwink the public who immersed in patriotism. Thus, we did not know what the bond was meant for and how the personal “bonds” of the people who ran the show marred the original script of “running the country” presented in elections manifestos which ranged from liberating the country from the clutches of terrorism and from the economic downfall and went on to promise unplugging the economy from the debt trap. Here begins the story of “It’s all Greek to me…”

The latest story related to the bonds occurred in March 2015 with the advent of the yahapalana government with an accusation hurled by the members of the joint opposition towards the government that they had used the issuance of bonds to raise funds required to pay the bills for the cost incurred at the presidential elections and to get ready for the forthcoming general elections. The critics were smart enough to write a script that could unfold a severe blow to the newly appointed rulers, so that they could discredit the new rulers without accurate facts in hand. The concocted story presented a bleak picture of how the “precious” government security known as Treasury bonds were issued giving undue advantage to a primary dealer who was connected to the government and the governor of the central bank. They started calling it a “bond scam” and gave birth to the first part of “it’s all Greek to me”

Hither, the new Governor of the Central Bank appointed by the yahapalanaya government took immediate steps to strictly follow a transparent method in issuance of bonds through a public auction system. In contrast, his predecessor adopted a system which is called private /direct placement where the transaction took place between two parties which occurred quite unnoticed with no due scrutiny. The preference for private placement by the previous rulers is evident in the number of occasions wherein the bonds were issued through private placements and auctions which stands 80 % in favor of the former mode. The auction system is believed and accepted as the most transparent mode in contrast to the private placements. Yet, some critics who were silent contributors to the corrupt Central Bank practices, attempt to create public opinion that private placement is the best practice or else not a bad practice and, go on saying that corruption is prevalent in the auction system.

Auction system is a transparent system in which equilibrium price is determined by the bids submitted through fully automated computer system within a given time frame. For example, if a bond is issued via auction system, by the end of auction CBSL announce the weighted average price and quantity accepted. Market has all the necessary information. Private placements, in contrast give space for manipulation as the parties agree price and quantity away from the market. For example, if the weighted average price of last auction is Rs. 100.00 and secondary market is Rs. 99.50, private placement can take place at Rs. 98.00, so the buyer can sell in the secondary market (offload it to state entity) at Rs. 99.50 to bag a profits of Rs. 1.50.( Now imagine, the figures are all in billions.) No information on price and quantity is revealed to the market, hence nobody can write anything on the paper in relation to private placements. It is buried under the carpet; hence the public has no clue of what has happened. Finally it is landed in the books of the government-owned entity like EPF at whatever the price the money makers would like to “resell”. For years and years the central bank happily used these corrupt practices of offering off the market rates via private placements to their favorites and thereby some officials benefitted themselves with the blessings of their patrons.

The critics came out with various arguments and accused the newly appointed Governor for aiding and abetting a scam which he could have otherwise committed very well, had he not introduced the open transparent system. This confuses me.

Likewise the numbers shown by Bandulas, DEWs, and Cabraals and Rusirupalas contradict each other and at times the same critic presents various numbers without proper justification. All those calculations seem to be based on imaginary numbers. Once an auction concludes, no one can make a judgment of what would have been the alternate price in-lieu of the quoted price, as the central bank makes decision based on available bids. Those imaginary calculations are nothing better than somebody concluding he should have bought vegetables at better prices if nobody else came to the market on that day.

On the other hand, if the previous administration was in favor of private placements, without going an extra mile to introduce a transparent and a better system, one can assume that the so-called scam would have occurred without anyone’s notice or scrutiny at that time. The point here is if the Governor wanted to indulge in malpractices he would not have opted to change the system, which was meant for such wrong doing.

The second story of the bond scam unfolds this year in march and this time is not only the joint opposition, but some of the civil groups and movements and some members of the incumbent government have joined the bandwagon to criticize the Governor, the monetary board ,the central bank and the government for malpractices. Without adopting to an accepted legal procedure their modus operandi began with a view to create a public opinion to bring discredit to the UNP leg government and thereby jolt the yahapalana coalition .

Most of these gentlemen (sorry venerable monks as well) act as if they have woken up from a deep slumber …so its all Greek to me. Writer has the justification for that.

The real bond scam in fact happened during the tenure of former governor Cabraal. Which is indeed “all greek to me”, so as to everyone else. It was Greek Government Bonds (GGB), simply Greek Bonds that let the cat out of the bag. The loss incurred through buying greek bond was greek to everyone, but was very clear to the Auditor General who calculated Rs 2.15 billion as the loss. Auditor General has not imagined anything, just calculated difference between buying and selling price. As it was Greek to the then members of the government at that time and now that of the joint opposition, no body voiced any concern or may be, they were happy about a defeated politician running the Central Bank.

Hedging issue too was Greek, as no folk understood hedging, not even then CPC chairman and the issue begged an answer whether the then Governor who consulted CPC behind the curtain had an idea or not. Apparently, it had been all Greek to him as well. Finally, the result was a massive loss of nearly Rs 7 billion to the state coffers. How many Pet Scanners could have bought with that money, any guess? Its not Greek, number is 35. Losses to EPF through corrupt share market transactions ranging from the purchase of shares of a gas company, couple of leading but loss making hotels and in finance companies were Greek to many while the experts in the trade were aware of the fiasco. Selling gold reserves of the Central Bank to a Japanese company is a another golden scam that benefitted a few and robbed the public.

Finally, What is more Greek to me more than anything else is why the joint opposition folks and some members of the present government who were in deep oblivion when the robberies were taking place during broad day light, are now crying foul? Well, its time to wake up and wear the thinking cap so that we shall see that the real issue is not about a bond scam, but it is about a political scam.

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Latest comments

  • 2
    3

    To cover election bills is it?….No, it’s much more visionary than that!

    Well, there’s nothing we can do if Yahapalanaya is so enamored of the Indian common-market is it? But we’ll watch out for the land-bridge, and make sure it never happen!

    Wish they tell us the proportions of their Middle-Path intent e.g. 50:50, 40:50, 50:40, 10:90, 90:10 and so on, for India:China….20:80 will surely secure Lankan heritage. Then we can rest easy, and place our trust in them.

    As per Rajapaksas, whatever and however they did bonds, there were a hellava lot of buildings that came up during their tenure.

    • 4
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      Ramona Therese Fernando

      Living your miserable life in Pennsylvania do you understand anything about free trade that you are harping so much about the Indian common market? With 1 billion people and a middle class of over 300 million (middle class in india btw would qualify you to be upper class in your redneck land) in India, and similar numbers projected for China, who else would you rather we be trading with? The EU, which is growing slower than Antarctica? The US, which is hardly doing better?

      How about you learn some basic economics first. What have you done for this country anyway that gives you a right to criticize, other than running away at the FIRST CHANCE?

      • 1
        2

        Not much class difference here Bagehot….people scorn such things,in true Christian-heritage spirit.

        EU, Antarctica, US,….believe me- those are far better places to be free trading with, other than India. We would want none of the 900-million (1.2 billion- 300 million) Indians swamping our shores. Indian economy has plateaued. There’s no where else they can go. That’s exactly how the West wants them. China is a different story.

        ps. Not me….I never ran away(was beyond my control).

        • 4
          0

          Ramona Therese Fernando

          You must truly have been born yesterday or think the earth is flat if you think there is no ‘class difference’ in the USA. Since you clearly don’t know much about economics, may I recommend the Thomas Pikkety book Capital in the 21st Century, or if you don’t have the patience or the ability to scroll through 700 pages of econo-speak, here is Nobel Laureate Paul Krugman (American) breaking the book down in to very simple terms, thereby outlining the class differences that actually do exist beyond your wildest dreams:

          https://www.youtube.com/watch?v=QzQYA9Qjsi0

          Highly recommended all these US worshippers watch that.

          I am not saying Pikkety is 100 right in everything, but he is far more right than he is wrong.

          This book is an eye opener for anyone (like Ramona) who thinks the West is now classless or is so much more superior because it has ‘equality’. The biggest level of inequality is in the US, not in Europe or asia. You could also look into the Koch brothers and their doings in manipulating US politics for the last 30 years using their black money. Such naivete, Ramona Therese. I thank god (if there is one) that you did not stick around to mess up Sri Lanka with your naivete.

          • 0
            0

            Bagehot,

            There’s monetary difference e.g. the 1% vs. the 99%. But that monetary difference necessary for capitalism, does not translate into class differences. In the public arena, e.g. public schools, universities, work-place, there are laws, rules and policy against discriminations based on national origin, race, gender, color, disability, religion, or familial status.

            For example, a blond White Christian man of billion status, can marry a Black Ethiopian woman of Ubuntu faith who came as a refugee and is on food stamps.

            Indeed, such difference are celebrated. But if America does not look too good with the Egalitarian system at times, that is because there are so many different races and human interaction options here. Now compare that with the Indian caste system against people who are of the same race.

    • 0
      0

      Ramona Theresa

      I must admit that I haven’t a bloody clue about this ‘bonding’ business.

      Actually, the first time I thought it was about ‘bonda aluwa’ which I loved very much. Later, when I grew older, I learned about ‘Bondage’. Bondage is a very good activity that can be most therapeutic. A good friend also told me that it a good business to invest in, and the dividends are very high, with low risks, and some good perks. I have heard of many MP’s who have invested in the ‘Bondage’ business but I regret I can give you no introductions. Strictly Private you see.

      Anyway, these Central Bank bonds are for the pundits. Best left alone if you do not understand them, or do not have access to insider knowledge.

      ‘Insider Knowledge’? Now that is a dirty phrase in Banking.

      • 0
        0

        Spring Koha,

        There are 3 things that is seen this bond issue :

        1) Raj Rajaratnam’s hedge fund was valued at $3.7 billion in 2009, down from a peak of $7 billion in 2008.

        2) War in Sri Lanka ended in 2009

        3) Comarasamy gave technical assistance to RR 1 year before RR’s indictment in 2009, and a few months before the end of war.

  • 3
    0

    Bond Scam would look “Greek” to anyone unless they remove ‘Green’ and ‘Blue’ Glasses they may be wearing. The people whose blood are of ‘Red’ colour and not ‘Green’ or ‘Blue’ have seen the Bond Issue in a realistic perspective and do not need to argue until cows come home ! Rajasinghe

  • 7
    2

    Thanks Mahesh, I further believe that AM was innocient.

    All these numbers added by those Gurus – Dew and others are just arbitory numbers.

    And the fact, from the interview given to Bandula Jayasekara, I got to know an impression, that AG is as others sounded one another who rather add a with b.. that is all.

    You yourself says, even learnt men and women cant get it – why is that

    QUOTE
    Auditor General has not imagined anything, just calculated difference between buying and selling price. As it was Greek to the then members of the government at that time and now that of the joint opposition, no body voiced any concern or may be, they were happy about a defeated politician running the Central Bank.

    UNQUOTE

    I wish I could know more about AG s experience.

    I wish I could know what newly elected CG has to say about the SO CALLED BOND scam, that to have occured by unprofessional work of Arjuna. My feeling is – Arjuna was innocient from the begining on.This was clear to PM from the day 1. I still believe, PM would never allow anyone who is or was highly corrupted. That is his nature. I continue believing so. May be there there are few UNP ministers could be corrupted as other others, but that is not PM s fault. I am no means of UNP supporter but for some time now I study the profiles of lanken politicians asking why the many behave highly corrupted.

  • 5
    1

    Even today, all is greek to me in terms of the allegations levelled at Arjuna.

    As Mahesh makes it clear. AG has just calculated those sums as any simple simon even with zero knowledge would do.

  • 2
    0

    There are enough professionals in the country specialized in various fields and having good experience who could explain complicated issues. The problem is how could we keep faith on them when one specialist tell one thing and the other tell just the opposite. I feel their answer depend on to whom they favour. Not almost all professionals are like that but many in our country. We should correct that.

    • 5
      0

      Syani,

      there are secrets in those issues- reveal them could jeopardise everything.
      At the time, RW promised to boom the ecomnomy he di dnot know how deep the hole is – but just added promises – all that way kept away from Rajaakshe adminsitraton – … today, if he would reveal the gravity of the problems are beyond recover, the investors would not keep the faith on the govt. For this and several other reasons, they dont allow CBG to take part in open discussion clearing the issues once for ever.
      There, CBG is seen as the SCAPE GOAT for all – which is beyond injustice. I further believe, from his performance, cant do any kind of wrongful decisions to claim the kind of defarmations. JVPs know nothign but what they know is also limited – not inside news. Inside sensitivities are kept away from the media – to protect the govt.

  • 8
    2

    Arjuna Mahendran was the target of a well orchestrated witch hunt. I am yet not convinced other wise. I hope the bond issue will be pursued to its bitter end. He should be found innocent or guilty by the Supreme Court. AM should insist on this. We need to know the truth and it is our right.

    Thank you for your explanation.

    Sri Lanka has been made into a nation of vicious and avaricious sharks. The Auditor General has alluded to have vested interests in the treasury and finance ministry are blocking the audit bill, that will make every public servant accountable for monies they have been authorized to spend, in a recent interview.

    Dr.Rajasingham Narendran

    • 5
      0

      There should be secrets for the govt not to allow Arjuna to speak ABOUT the issue in a discussion round. Why is that ? This should have occured long long ago.

      This week, AM is scheduled ot meet COPE with or without newly elected governor. However, COPE s president behaves as if he would be the judge to bring the verdict. Lack of experience, COPEs president seems to utter nonsence, he though please stupid masses, but he should work as a professional person to the committeen not leaving personal attacks to former GOvernor.

    • 4
      0

      Yes, he should be found guilty or not guilty by none other than the Supreme Court. No other Kangaroo Court is good enough.

    • 2
      0

      Rajasingham Mamma,

      Can you tell me why Ranil appointed 3 UNP stooges to investigate Arjuna if he was white as snow? Why not appoint a independant committee and clear his name once and for all?

      Tell me, all knowing mamma?

      • 1
        1

        The nature of poltics in this country has classified people into categories , labelled them and assigned them to water tight categories. There are UNP, SLFP, Sinhala-Budhist, Tamil-Tiger stooges, etc., only in tgis going by this classification, if anyone chooses to come into public life. According to this moronic system, anyone who mattered in Hitler’s Germany could have been only a Nazi!

        Dr. Indrajit Coonaraswamy is now being painted as a partner in the crime Raj Rajaratnam of Galleon fame, committed, by a bunch of crooks and thieves like Wimal Weerawanse and Fammanpika!

        Dr.RN

        • 0
          0

          What do you expect from a nation whose majority would stay eating Punnaku forever ? This isthe other side of the coin. Democracy is fine, but countries like ours .. we cant apply democracy but Social Democracy the kind of Germany ‘s SPD (Party for social democrats).
          Even Germans with higher literacyy and average rates would not allow everyone to decide in key areas, since they truly know that can backfire. Likewise, srilanka, we need Mahatheer mohammed type politicians, after turning the majority folks to good thinkers. Paradigm shift of the society will surely given lankens a ride …. sociologist, psychologists and other profesisonals have to work turnign them to healthy thought bearers. Then only we can expect them to even vote for good andtalented politcians allow them representing in the parliament.

    • 1
      1

      Dr RN

      What are you talking about? Mahendran was already cleared by the Supreme Court 3 judge bench, as he himself says here: https://www.youtube.com/watch?v=UlgQZkc

      • 1
        0

        Why is there an on-going COPE Inquiry now and why has the Auditor General submitted submitted a seemingly adverse report to it?

        Dr.RN

  • 6
    1

    “the new Governor of the Central Bank appointed by the yahapalanaya government took immediate steps to strictly follow a transparent method in issuance of bonds through a public auction system.”

    Some day when people begin to understand this whole bond shindig and the injustice done, they might perhaps realize that Arujun Mahendran was Sri Lanka’s very own Alfred Dreyfus.

    I lay the blame solely on Ranil; the bumbling, ham-fisted way he defended Mahendran. There is no doubt the accusations were politically motivated. But, either Mahendra is guilty or innocent, there is no middle ground. Ranil, who the average-man believe understands sophisticated complex economic matters should have come right out and said Mahendran is not guilty. Rather than keeping things open-ended by passing on the responsibility to committee after committee. Unfortunately that gave the impression the poor guy is guilty.

    In the end, the whole world is knee-deep in deception. That’s life!

    Like good old Groucho said,

    The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.

  • 3
    0

    Tks Mahesh the affected are so week in putting the record straight you have done the job for them. This is mostly Cabral’s ghost.

  • 7
    1

    Arjuna Mahendran was the target of a well orchestrated witch hunt. I am yet not convinced other wise. I hope the bond issue will be pursued to its bitter end. He should be found innocent or guilty by the Supreme Court. AM should insist on this. We need to know the truth and it is our right.

    Dr. R.N, may i add Killy Raja Mahendran through his seerasa media coolies, Cabral, JO, got what they wanted. Their only aim to topple the UNP govt.

    • 4
      0

      Yes, SIRSAA is doing some good work. But allways their performances are not the best. The questioned being raised by them are so silly evne if they Sirasa journalists. Not giving sometimes, to attack the current regime by their kind of promgrass gamin gamanta. is beyond all levels. Who is behind all of them if not funding .. from Rajaakshes kalliya.

  • 3
    0

    How can we believe people like DEW, who dont know if they’re coming or going, Bandula, who said a family can survive on 2000 rupees a month, or Rusiripala the so called banker, who has never actually run a bank in his life other than being in some lowly clerical job at BOC and then getting favour to run Ceylinco companies for that crook Kotalawala? And what about that former governer cubby who did not even know to calculate the value of a bond according to Verite Research?:

    This is a good breakdown of any actual loss (if any): http://www.dailymirror.lk/78805/central-bank-s-30-year-bond-debacle-what-is-the-loss

    It is up to the relevant investigation committees to hire specialists to do this investigation, not JVP cadres and dried pumpkins.

  • 2
    2

    Great article Mahesh.
    Hats off to you for setting the record straight.
    Dr RN & Muddson Silva too for your very accurate intelligent replies.
    I hope that Gamarala Sirisena & the PM who didn’t back AM & let him go, will learn the lesson of their lives when they default on the loans given to the Government which are due soon for repayment.
    I don’t know anything about the new Governir except that he is a Kalu Sudha & only came back to Colombo after he retired or was try retrenched or may be after RR s a Galleon went bust.
    He is a lackey of Milinda, Malik, Cabraal & Rajapakse.
    Can you Mr PM TRUST THIS ASS.

    • 3
      1

      Sona

      “I don’t know anything about the new Governir except that he is a Kalu Sudha & only came back to Colombo after he retired or was try retrenched or may be after RR s a Galleon went bust.”

      You clearly like to run your mouth about things you don’t know much about, without ever checking your facts. He worked in the central bank for nearly 20 years after finishing his PHD, and has mostly been based in Sri Lanka and was outside only on business related to the country.

      You can find out a bit more about him here: https://www.youtube.com/watch?v=riEqOx8oc0U

      What have you done for Sri Lanka in the last few years?

  • 3
    0

    Mahesh, There is nothing Greek here. The people of SL voted to change the MR government because it was corrupted. So people voted to appoint this government to bring the culprits[Arthika Gathakayo as Champika R.said] to the justice. I wonder why FCID or whatever did not arrest Cabraal so far and file a corruption charge against him. And I wonder why Asantha de Mel not arrest for Hedging deal. If there is any difficulty there,like lack of evidence..? Or just because this government also wants to do the same. People and the social media scream about this bond scam, because they did not wish this government became a carbon copy of previous government. Don’t ask the stupid question that why did not people or media scream about at that time?

    It is crystal clear to the public that who was behind who was appinted and protected Arjuna Mahendran.Arjuna Mahendran controlled by his superiors. But nobody likes to mention or talk about it. This government promised to bring proposed Auditor General Act which drag along since 2005 and pass it in the parliament which gives sweeping powers to auditor general. But now it is postpone day by day.

  • 1
    3

    Ranil realised that his so called friends let him down badly.

    So, he with Ravi hatched the Bond scam and went ahead with it not once but twice. Thereby to overcome some hidden problems, Ranil was ready to sacrifice AM and made him a convenient sucker because he was a resident elsewhere.

    AM was appointed for two years and successfully used for (02) Bond scams and he parted.What else you expect AM to do other than have good time in his position and depart.

    It was not AM but it was Ranil who got him to do the hara kiri.
    Now Ranil is self sufficient, Ravi.K is living in a hotel suite, AM gone.
    Now comes to the scene Dr. Indrajith.C. Now Ranil nor Ravi.K can perform their larks. he is focussed and more matured than AM.
    Now, Yahapalanaya will have to look sharp as Dr. IC will not tolerate their nonsense.

  • 1
    1

    Nepotism, Conflict of Interest and Insider Trading look all Greek to you for sure..

  • 1
    0

    Bageshot.
    I have done my research better thsn yours.
    The Governor never lived here & went abroad for business.
    His business was all abroad.
    You do your research first & shoot.
    Moron

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