By Rajiva Wijesinha –

Prof. Rajiva Wijesinha

As we move to the questions addressed to the Prime Minister about the details of what took place in February 2015, the obfuscation gets more striking. So it seems desirable to add on the underlying rationale for misleading answers that were submitted, in the secure expectation that no probing questions would be asked, Dappula de Livera and Yasantha Kodagoda having been pushed aside.

(11)

Question number 11 is as follows-

“The evidence before this Commission of Inquiry suggests that, any sudden stoppage of the practice of accepting Private Placements of Treasury Bonds was likely to significantly impact the Government Securities Markets, the Treasury Bond Yield Curve and Interest Rates paid and offered by Bank… Further, the evidence before this Commission of Inquiry suggests that, in terms of the Monetary Law Act and the procedures which then prevailed in the CBSL, any proposal to stop the entrenched practice of accepting Private Placements of Treasury Bonds, should be considered by the Monetary Board and decided upon by the Monetary Board, before it was implemented.

… in the light of the aforesaid considerations, what did you expect Mr Mahendran to do in pursuance’ of any instruction you may have given to him, on 24th February 2015, with regard to Private Placements?”

My reply is as follows-

I am not going to answer that question but will simply say again that under the last Government, the determination of interest rate in the Government securities market had been distorted by moving away from a market based mechanism. This had led to a loss of investor confidence.

To the best of my knowledge, private placements were not entrenched in the securities market.

Furthermore, as private placements invariably took funds from captive sources such as the EPF, the beneficiaries of such funds received diminished returns on their savings. We found a better way to reduce benefits by putting people in decision making positions at the EPF and so on, who would buy bonds at exorbitant rates from our chosen beneficiaries. Our policy has always been to encourage market mechanisms and to further macro economic liberalization including the rates of interest and exchange to be determined by the market, but in the short term, to benefit our chosen capitalists, we put a group of shysters in charge of various institutions so that our friends made massive profits and EPF beneficiaries got much less which went to these friends rather than the country, which Eran had identified as a big problem.

… any adverse impact on the market would have been minimal in the short term and off set by long-term investor confidence, and you must not blame me for the collapse of confidence in our ratings.

…. it was expected that Mr Mahendran would take appropriate steps in accordance with due procedures to give effect to the objectives of the Government as expeditiously as possible in the light of concerns expressed by me and this he did, since my concern was to pay the party debts, and the principles I have enunciated above were platitudes to fool you guys and the country at large.

(12)
Question number 12 is as follows-

“The evidence before this Commission of Inquiry suggests that, the Ministry of Finance had identified that a substantial sum of money was required to fund payments …..(but) the Monthly Cash Flows forwarded by the Treasury to the Department of Public Debt in the Months of February 2015 and March 2015 do not call for any funds to be raised for the above purpose in February 2015 or March 2015.

The evidence before this Commission of Inquiry suggest that, a meeting was held at the CBSL on 26th February 2015 to discuss how to raise the funds required to make these payments and …. it was decided -that a Deputy Governor of the CBSL will prepare a report identifying the payments that were due and ….. another meeting was to be held later for the purpose of considering the report…

the evidence before this Commission of Inquiry suggests that, the funds required for these payments were to be raised only in the months of April or May 2015 and that, there was no requirement for any funds for this purpose to be raised at the Treasury Bond Auction held on 27th February 2015 or at Treasury Bond Auctions to be held during the month of March 2015.

In this background, did you instruct Mr Mahendran to raise funds for the aforesaid payments at the Treasury Bond Auction held on 27th February 2015?”

My reply is as follows-

Why are you talking about evidence when I, the duly appointed Prime Minster of this country, issued instructions as to what was needed, to benefit me and my friends which of course would benefit the country in the long term? What you should accept is that at the Cabinet Sub Committee on the Economic Management, Budget proposals for which funds were needed and development projects for which payments were due, were discussed. The people on that Committee do as I say, and The Minister of Highways stated that there was an urgent need of funds for road development projects, which were undertaken by the previous Government for which the Treasury was unable to provide funds. The Interim Budget also involved additional expenditure including an increase in recurrent and capital expenditure in March. I requested that the concerned Ministers and officials of the Treasury and CBSL meet as soon as possible. Subsequently, they including the Governor CBSL had met on 26th February 2015 and they determined that Rupees Fifteen billion was urgently required. By this time, CBSL has already decided on a bond issue on 27 February, 2015. My current answer is intended to suggest that the two matters are not connected, and that is why my chums Kabir and Malik claimed that it was not decided on the 26^th to raise the funds we wanted through the bond issue, and I am sorry that I let the cat out of the bag in March 2017 by saying that was decided then.

I trust that, due to the respect owed to me as the Prime Minister of this country, you will not allow me to be questioned on this contradiction, just as you let Kabir and Malik off the hook given the respect due to them as the Chairman and Secretary of the UNP, which you must grant should be considered synonymous with the country. Ravi of course is another kettle of fish, and you should be satisfied with his scalp, given that he was more shameless than we were and even got an apartment from Mr Aloysius and then repeated the scam in March 2016 which had not been part of the original plan.

And he was stupid enough to send a letter to Mahendran, well after the date, claiming that the discussion on the 26^th was about 75 million rupees. I suppose he was confused about the excessive bonds we wanted issued in 2015, and the even more excessive bonds issued under his patronage a year later. With friends like that you do not need enemies, but I continue to have the fullest confidence in him and will give him lucrative employment, because he knows too much about my wheeling and dealing to be totally dismissed.

And if you do not trust me, Any further details of cash flow and fiscal affairs for those months could be obtained from the Secretary to the Ministry of Finance, so you should not rely on the details you have already obtained and put forward in your cheeky question.

(13) Question number 13 is as follows-

“Did Mr Mahendran have any discussions or conversations with you prior to 27th February 2015 and/or 27th February 2015, with regard to the Treasury Bond Auction held on 27th February 2015?”

My reply is as follows-

Mr. Mahendran did inform me that the Monetary Board had fixed a Treasury Bond Auction for the 27th of February 2015. I will not tell you when he said this since you might then deduce that Kabir and Malik went to see him on the 26^th on purpose, which I had suggested was the case in my speech in Parliament on March 17^th though later Kabir and Malik disowned the connection. Mr Mahendran did not tell me that only 1 billion had been advertised, sensibly because it would have been counter-productive to tell me this and that he planned, contrary to all market principles, to take 10 or 20 times that amount, from those with the acquired wisdom to bid (and acquired funds from the Bank of Ceylon, which would of course lend the money without any due process).

In the evening of 26th February he informed me that since it transpired at the meeting held with the Minister of Highways and others, purely coincidentally you must believe, though I do not care a damn as the Prime Minister of this country if you don’t, that there was an urgent requirement of Rupees Fifteen billion to pay for the ongoing road works, it may be possible to raise at least a part of it at the Auction fixed for the 27th of February. After the Auction held on the 27th of February 2015, he informed me that in fact Rupees Ten billion had been raised, which he had insisted on contrary to the advice of his officials.

(14)

Question number 14 is as follows-

“Mr Mahendran has stated to this Commission of Inquiry that, subsequent to the Treasury Bond Auction held on 27th February 2015, Hon. Dr. Harsha de Silva telephoned him and conveyed that you had requested Mr Mahendran to submit a “Briefing Note” with regard to the events relevant to that Treasury Bond Auction.

Is Mr Mahendran’s statement correct?”

My reply is as follows-

I recall instructing Dr. Harsha De Silva the then Deputy Minister of Policy Planning and Economic Affairs to request Mr Mahendran to provide a note pertaining to the procedure followed at the Auction held on 27th February 2015. Of course I cannot tell you when and why I did this, and why I failed to follow up, but this is one of those instructions that really did not matter, and I only issued it to pull the wool over people’s eyes – including Harsha since at that stage he might have been averse to defending any scam.Fortunately by the time of the second COPE report, he had been brought to heel.

Any story that the President called me from China because he had heard there were irregularities should be ignored. I set in motion a Commission of Inquiry composed of my friends who were involved with the UNP to stop any other Inquiry taking place, and gave them terms of reference designed to draw attention to irregularities on the part of Mr Mahendran’s predecessor. I am sorry they did not find any. But I strongly believe that if we continue to look we will find something even though obviously we will not be able to prove any loss to the country on the lines of what happened because of what Mr Mahendran and Mr Aloysius and Mr Ravi Karunaratne did, even though I continue to have full confidence in all of them, and will use them again as and when I or the party (which you must consider the same as the country for all practical purposes) needs them again.

(15)
Question number 15 is as follows-

“Did Mr Mahendran submit a “Briefing Note” to you, with regard to the events relevant to the Treasury Bond Auction held on 27th February 2015?”

I could not remember what had happened, obviously because I did not really need to know more than I knew already, with the money in the bag as it were. So I had to look, and Upon receipt of the questionaire forwarded by the Commission I directed my officials to cause a search to be made in my office for briefing notes submitted by Mr Mahendran. Consequently my officials have traced in my Secretary’s computer a briefing note titled “Factual Information on the Issue of 30 year Treasury Bond by the Central Bank on 27/2/2015 – the Procedure Followed” forwarded by Deputy Governor Mr Samarasiri. I have been advised by my officials that there are no other briefing notes traceable at my office. I did not take this seriously, so we did not bother to take a hard copy or follow up with any questions, because I was quite confident that I could pull the wool over everyone’s eyes through the Pitipana report, even though they did not quite give the transaction a clean bill as I had hoped. But we would have got away with it, given the intellectual genius with which I succeeded in throwing the blame on Mr Cabraal in my speech of March 17^th, as Kabir and Malik assure me I did, had not that pesky President drawn the issue out. But I will set my dogs on him now as I did before to D E W Gunasekara when he wanted to publicize a report which I had ordered should be suppressed.

To be continued…

Part (i) – Ranil At Bay: An Annotated Version