Sri Lanka’s‘pita-pita’ bond game
View(s):More than the uncertainty and guessing games over whether former Central Bank (CB) Governor Arjuna Mahendran is guilty or not in tainted Treasury bond issues is the very existence of the present administration. Both President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe have publicly given contradictory views on Mahendran exposing a major political leadership crisis in the government. This came to the fore on Thursday evening when the PM – despite the President announcing in a tweet on Wednesday that he would be ‘appointing a new Governor within a couple of hours’ – sought to stall that announcement. On Thursday, the PM told state TV broadcaster, ITN in a televised interview, that the former Governor is so far not guilty having being cleared by a UNP Committee, the Supreme Court and a police investigation. A statement that is nice on paper but factually incorrect.
While the 3-man committee of lawyers, which came in for a lot of flak as the members were UNP supporters, cleared the Governor of any wrongdoing, it said further investigation was merited. The Supreme Court didn’t fully investigate the allegations apart from refusing ‘leave to appeal’ in a petition filed over the bond process while to the public at large, this is the first time one hears of a police probe into the February 2015 bond scam in which the Governor is accused of favouring his son-in-law’s firm, Perpetual Treasuries. It was not only the PM who has faulted in this process but the President ‘jumped the gun’ in announcing that he would appoint a new governor on Wednesday. And then there was absolute silence instead of informing the people as to why a new governor was not appointed as promised!
There were also reports that the President had gone to the bank on Wednesday armed with the appointment of Deputy Governor Nandalal Weerasinghe, the most senior deputy governor at the bank who has been sidelined by Mahendran in favour of Deputy Governor P. Samarasiri. However with the PM’s sudden entry with Mahendran at the bank, the President appeared to have postponed his plan. Such a move by the President in addressing bank staff and planning to announce the appointment of a new Governor is also not established practice and sets a bad precedent. At stake is not only the urgent appointment of a Governor (by 10 am on Friday July 1 a new appointment was yet to be announced) but an emerging political fallout which threatens the continuation of the 2-party government.
After parliamentary polls in August, the two main political parties (UNP and SLFP) formed a national government for a period of two years. With one year almost over, the second year is set to be a tumultuous period given the emerging crises in the government with UNP and SLFP minister pulling in different directions and openly attacking each other. While the two leaders – President and PM – have by and large distanced themselves from the infighting, the CB crisis is threatening that smooth relationship at the top. According to reliable sources, the PM has said that if Mahendran is proved guilty in the report of the Parliamentary Committee on Public Enterprises (COPE), then he would bow to the verdict. But until the COPE probe is completed, the PM’s nominee is UNP loyalist Charitha Ratwatte who would then step down to make way for Mahendran’s return, if the latter is cleared by COPE.
The issues and developments over the past few days and statements made by different stakeholders in some cases have been from the sublime to the ridiculous. Some ministers have gone on record suggesting that an acting governor would be appointed not realising (or due to lack of knowledge plus shooting off the hip) that an acting appointment is not permissible under the Monetary Law (as pointed out in many of our previous editorials). However the Attorney General (AG) appears to hold the view that an acting appointment can be made, though how is unclear. On Thursday at an emergency meeting of the Monetary Board, Samarasiri had produced a letter from the AG stating such a view though Treasury Secretary R.H.S. Samaratunga pointed out that the Monetary Law doesn’t permit such an appointment.
Legal experts from both sides have been studying the law, though until a few weeks back (at the time when the Business Times raised this issue) no one in the government realised that the law doesn’t permit an acting appointment. However an acting appointment may be possible using Presidential powers, if the President is persuaded to by the PM. For instance though the Monetary Law explicitly says that the CB comes under the “Minister in charge of Finance”, the President, on the PM’s recommendation brought it under the latter’s ministry, lock, stock and barrel last year, setting a precedent. A miffed Finance Minister Ravi Karunanayake then said publicly that he had nothing to do with the CB.
Now with the evolving crisis, Karunanayake is back in the reckoning as the President has been persuaded to consult him as per Monetary Law on the appointment and that would happen only next week when the former returns from China after an official visit. However it is also possible that by the time this edition is on the newsstands or in the hands of readers, a new appointment would have been made. In the year-long drama, the Finance Minister and 30-year old Arjun Aloysius – Mahendran’s son-in-law, have becomes pawns as both leaders play games and keep the public guessing. The end result is that the appointment of the Governor which historically has been a smooth and unruffled process has led to a political deadlock causing many precedents and possible changes in law – all for the love of a Singaporean banker and his son-in-law.