Columns

Arguments over the impact that the government’s resolution on Domestic Debt Optimisation (DDO) could have on the Employee Provident Fund (EPF) and the Employee Trust Fund (ETF) dominated the debate on the Government’s debt restructuring resolution presented to Parliament yesterday.

Opening the debate on the “resolution for the implementation of the Domestic Debt Optimisation to restore sovereign debt sustainability,” Finance State Minister Shehan Semasinghe said the government enacted many economic reforms in the past few months to win the trust of creditors.

He pointed out that all these reforms were undertaken after informing Parliament. Tax revisions resulted in an increase in state revenue while the tax net was also widened, he said.

Other reforms included the electricity tariff revision and the introduction of a fuel pricing formula to ensure that the Ceylon Petroleum Corporation and the Ceylon Electricity Board were no longer a burden on the taxpayer. All but essential expenses were either curtailed or completely slashed. The preliminary work on restructuring state-owned enterprises had also been done, he noted.

Nevertheless, to ensure permanent debt sustainability, the Government had to win the trust of its bilateral creditors and obtain their agreement. To do this, it was essential to implement “Domestic Debt Optimization,” Mr. Semasinghe stressed.

“The opposition has already said it opposes this process. The Opposition Leader raised questions on this matter in Parliament several times over the past one and a half months. On each of those occasions, the government’s stance was that it will keep Parliament informed of the agreements it has reached. It also requested the opposition to hand over any proposals it has regarding matters we were yet to reach an agreement on.

“The opposition did not submit any proposals. It is not enough to go around talking about proposals on street corners. If the opposition had handed over a proper list of proposals, the Cabinet could have considered it along with the government’s proposals,” Mr. Semasinghe claimed.

State Minister Semasinghe making a point

In response, Opposition Leader Sajith Premandasa reminded government benchers that while the Government was now saying DDO was essential, both the subject minister and the Central Bank Governor initially said there was no need to go for DDO. They even said that the EPF and ETF would not be touched in the event of debt restructuring, he added.

He said the Samagi Jana Balawegaya (SJB) supported going to the International Monetary Fund (IMF). The IMF, however, had not imposed a condition saying domestic debt should be restructured, Mr Premadasa claimed. “This is only being done because the Government wants it. This incompetent, inept government has negotiated a bad deal.”

Mr Premadasa said he did not believe Sri Lanka needed to go for DDO. There are many countries that had negotiated agreements with the IMF without undertaking DDO. Even countries like Ivory Coast, Dominican Republic, Iraq, and Ecuador, which had declared bankruptcy like Sri Lanka, had also reached agreements with the IMF without implementing DDO, he said.

Joining the debate, Prime Minister Dinesh Gunawardena blamed the opposition for creating confusion among the people with its premature comments, speculations, assumptions, and guesswork. “As a government, we take full responsibility for every step proposed by us and table in this Parliament on this matter. We clearly stand by the assurances already given by the relevant stakeholders.”

The country needs to reduce its public debt to 95 percent of the GDP from the present 128 percent of the GDP by 2032, the Premier told MPs.

The Government must undertake a programme of domestic debt optimisation to maintain debt sustainability within affordable and manageable levels, Mr Gunawardena argued. The PM, though, assured that the EPF, the ETF, and the banking sector would all be safeguarded.

The Tamil National Alliance’s (TNA) main objection to the DDO plan was over the impact the DDO would have on members of the EPF and the ETF, said TNA Jaffna District MP M.A. Sumanthiran. “These are the voiceless working class of the country. I say they are voiceless because even with regard to their own savings, they have no say. They can’t make the decision,” the MP pointed out.

As such, it was absolutely false when the government said that these persons were voluntarily participating in the government’s DDO programme, Mr Sumanthiran said.

Pointing to the EPF Act clause which says that the fund’s custodian is the Monetary Board, Mr Sumanthiran asked whether members of the Monetary Board really were being responsible custodians and making this decision on behalf of 2.5 million working-class members of the EPF. He said the EPF Superintendent who came before the Committee on Public Finance the previous day had admitted that he did not know what the restructuring plan was. “They haven’t been given (the plan). He said he saw it on Facebook.”

National People’s Power (NPP) Gampaha District MP Vijitha Herath said the Government was treating the working class in a different manner to the way it treats companies. For example, distilleries companies have not paid Rs. 6.2 billion in outstanding taxes but the government has made no attempt to recover these taxes. Comparatively, estate workers who toil each day to make ends meet are forcibly roped into the DDO process, with them being told their EPF interest will only amount to 9 percent.

Mr Herath also questioned how anyone could even guarantee that EPF holders would receive even the 9 percent interest on their payments. Experience had shown that though governments forecast their expected revenue in each Budget, they had not achieved anything beyond 70 percent or 75 percent of these targets. There was also no legal obligation to provide an interest of 9 percent, despite the Government’s insistence that it would be met, he said.

The DDO process must adhere to the principles of economic justice, said SJB Colombo District MP Patali Champika Ranawaka. The government’s plan does not envisage touching treasury bills and bonds held by the private sector, including banks. They will continue to be paid massive interest amounting to 30 or 35 percent. Therefore, the restructuring process has not adhered to the principles of economic justice, he insisted.

Most opposition MPs proclaimed on mainstream and social media over the past two weeks that the country’s banking sector would collapse after June 30, said Power and Energy Minister Kanchana Wijesekara. “They said the country’s economy in turn would crash on June 30.”

He said the opposition tried to stir up the same demons earlier when the Government introduced the electricity tariff revision, claiming that the entire country could plunge into darkness in July. “We are in July now and nothing of the sort has happened,” he said.