CB incurs eye-popping loss owing to irregularities 2011 – 2016
Sri Lanka Central Bank (CB) has incurred an eye-popping loss totalling millions of rupees as a result of irregularities and arbitrary decisions of former Central Bank Governors and top officials during 2011-2016 periods, a parliamentary committee report revealed. How does a money-printing Central Bank (CB) lose money? In this case, it was the fault of ex governors and Monetary Board (MB) officials who worked to please their masters not the masses, the Committee on Public Enterprises (COPE) has said in its recent report revealed. In one instance the CB has failed to recover outstanding loans and re-financing facilities amounting to Rs.6.1 billion that had been given to six defunct finance companies, out of the amount received from the liquidation of these companies, the report showed.
In the mid-1990s after a money printing and tightening cycle a series of finance companies collapsed despite the CB pumping hundreds of millions rupees into them and taking them over. The MB had given approval on 21.03.2011 to write off these outstanding loans and refinancing facilities during the period of 1988 –1994. Even though the Board had taken a decision to recover the outstanding loans and refinancing facilities provided to the six financial companies out of the money collected from the liquidation of the said companies, only a small amount of Rs. 18.4 million was collected by September 2014 from the total amount of Rs.317.1 million, received from the liquidation of the six companies, recent COPE report revealed.
The Committee has focused its attention to the fact of receiving Rs.18 million even after the writing off of the outstanding loans, which was an indication of the futility of the decision to write off the loans. In contravention of section 117 of the Monetary Law Act, the Central Bank took measures to purchase buildings in New York and Brazil spending US$6 million and Rs.122 million respectively and giving the buildings on lease. According to the Act, even though the Central Bank shall not engage in trade or otherwise have a direct interest in any commercial, industrial or other undertaking except such interest as it may acquire in the course of the satisfaction of any of its claims, it has purchased these buildings and given it on lease.
Without paying attention to the shortcomings of the actions taken by the officials who are responsible to these transactions, 4th and 5th floors of the National Mutual Assurance Building were given on lease in the years 2015 and 2016 even without their being used for achieving the expected objective, COPE report disclosed. In another instance, the CB has paid around Rs. 1.4 billion to three companies as consultancy service charges for a period of one year in 2014, on the basis of reimbursing that amount by the Treasury on behalf of the government of Sri Lanka. This money showed in the books as an expense of the Treasury without any claim for it from the Treasury. This amount was 68 per cent of the total amount spent in the year for obtaining consultancy and professional services, the report revealed.
The COPE also unearthed an irregularity of paying from the CB funds as PAYE taxes to be paid by the employees of the bank amounting to Rs.128.03 million and Rs. 159.4 million for employees in the years 2012 and 2013, respectively. Another payment of Rs. 10.91 million and Rs. 18.7 million was made for retired employees in the years 2012 and 2013 respectively, from the fund of the Central Bank in contravention of Public Finance Circular No: PF/PE 06 dated 31.01.2000. The COPE report stated that this action of the CB cannot be justified and that other institutions too may take this act as an example.