Beneficiaries of January bond repayment to be revealed

The Colombo Additional Magistrate Harshana Kekunawela yesterday (23) ordered the Central Bank of Sri Lanka (CBSL) to present to court the list of holders of the $ 500 million-worth International Sovereign Bonds (ISB) that matured on 18 January 2022, which was controversially repaid by the CBSL despite the critically low level of foreign currency reserves in its possession at the time. 

The order was issued by the Colombo Additional Magistrate as part of the ongoing private case filed against then-CBSL Governor Ajith Nivard Cabraal by former Southern Province Governor Rajith Keerthi Tennakoon, after the counsel appearing for the complainant requested the court to present the relevant list. 

Sri Lanka repaid the ISB on 18 January, despite calls by economists and the political opposition to avoid repaying to conserve the depleting foreign reserves to import essentials such as food, medicine, and fuel. According to a CBSL press release in February of this year, the country has paid ISBs totalling $ 2.5 billion since January 2020. 

Tennakoon’s complaint alleges that the payment of the $ 500 million ISB in January, when Cabraal was heading the CBSL, had negatively impacted the economy. 

There were suspicions cast in January that the urgency to repay the maturing ISB was due to it having been purchased on the secondary market at a discounted rate by friends and associates of Cabraal, with the assurance that the repayment would be made as per schedule. 

Among those who had cast these suspicions were Sri Lanka Freedom Party (SLFP) Senior Vice President Prof. Rohana Lakshman Piyadasa and former Janatha Vimukthi Peramuna (JVP) MP and former Committee on Public Enterprises (COPE) Chairman Sunil Handunnetti.

Speaking at a press conference ahead of the repayment date, Piyadasa had said: “Recently, the CBSL Governor claimed that the $ 500 million ISBs will be repaid. Who invested in the $ 500 million ISBs? People do not know these things. They think the Government is getting ready to pay off the debt.”

Similar assertions were made ahead of 18 January by Handunnetti, who had said: “The reason why they are so eager to pay off the ISBs on 18 January is not to save the country from a debt crisis. There are people in Sri Lanka who have brought these bonds. When bonds are purchased in the secondary market, we have no idea of the purchaser’s identity. Bonds can be easily purchased; they have been shared among these close friends. Do you understand what’s happening? This is how they make money from a crisis.”

He likened holding a Sri Lankan bond to “holding a time bomb – as the holder does not know when it would lose its value,” and that, once the date of maturity approached, the bondholder would look to sell the bond in the secondary market, considering the deteriorating economic situation of Sri Lanka and the likelihood of default.

“But the possible conspiracy is that if the final holder of the ISB and the party paying the bond upon maturity, the Central Bank, were to collude, they can certify payment of the bond, even if it bankrupts the country, in exchange for a commission,” claimed Handunnetti.

Furthermore, Colombo Additional Magistrate Harshana Kekunawela yesterday extended the overseas travel ban imposed on Cabraal to 25 July 2022. The Court has also issued summons to Cabraal, and counsel appearing for Cabraal has stated that he will appear in court on the next date. 

The complaint Tennakoon has further accused Cabraal of violating the Penal Code when he served as CBSL Governor from 2006 to 2015, when he had paid US citizen Imaad Shah Zuberi $ 6.5 million from public funds, without any permission from the Monetary Board or the Cabinet of Ministers. 

Cabraal is further accused of appointing close relatives to CBSL positions when he was the Governor, which has caused a loss of Rs. 10.4 billion to the Government as a result of confidential information being leaked.