Colombo, July 7 (newsin.asia) “It is totally unfair to subject the Employees Provident Fund (EPF) and the Employees Trust Fund (ETF) to the Domestic Debt Restructuring (DDR) and pay only 9% interest (when the inflation is in double digits for over a year now,” says Dr.Muttukrishna Sarvananthan of the Point Pedro Institute of Development.
“ This is because they are mostly the poor persons’ pension funds,” he said in a note on the subject.
“Historically, Sri Lankan governments have raided a captive source of pension fund, viz. EPF/ETF, for its fiscal profligacy over the past several decades. This is why some trade unions and economists have argued repeatedly over the years that the EPF/ETF held under the custody of the Central Bank of Sri Lanka is a danger to the primary stakeholders of the EPF/ETF; i.e. its members, and had campaigned to take away the EPF/ETF from the custody of the CBSL or any other government or quasi-government authority,” Dr.Sarvananthan said.
However, ironically, even today no trade union has yet raised objections to the EPF/ETF being subjected to DDR or has demanded pulling out the EPF/ETF from the custody of the CBSL, he pointed out.
“There is absolutely no hope in the foreseeable future for Sri Lankan politicians to reform themselves, irrespective of party affiliations, including the JVP. Therefore, one way to minimize corruption in the country and reduce the public debt of the country is to reduce the capacity of the Sri Lankan governments to borrow either locally or internationally,” he said.
Dr.Sarvananthan felt that a major way to reduce the local borrowing capacity of the Sri Lankan State is to make EPF/ETF totally independent of the government and the Central Bank.
“Another major way to reduce the local borrowing capacity of the Sri Lankan State is to privatize all the state-owned commercial and specialized banks and insurance companies. These state-owned financial institutions are routinely coerced to purchase Treasury Bond/Bills to finance the fiscal profligacy and audacious debts of the governments of Sri Lanka (national, provincial, and local).”
“Additionally, the state-owned banks and financial institutions are the facilitators and enablers of Sri Lankan politicians to become business people concurrently thereby creating a huge conflict of interest on the bidding for public tenders for public works.”
“In a nutshell, for the realization of public debt sustainability in Sri Lanka, privatization of the state-owned banks and financial institutions and the extrication of the EPF/ETF from the custody of the CBSL are sine qua non,” the economist said.
Curbs on External Borrowing
On the Sri Lankan State’s external borrowing spree, Dr.Sarvananthan said: “In order to reduce the capacity of Sri Lankan governments to borrow externally, a law should be enacted to prohibit external borrowing in private international capital markets through the issuance of sovereign bonds. Of course, the IMF or any other multilateral agency would not promote such a law because it is anathema to its promotion of private capital markets. Therefore, the aforementioned law should be enacted locally by parliament and the opposition political parties should demand such a law immediately.”
Suspicious Inflation Figures
On the inflation figures put out by the government Dr.Sarvananthan said: “I am suspicious of the recent downward trend in the inflation to reach 12% in June 2023; especially the food inflation dropping to 4.1% in June 2023 from 21.5% in May 2023. I have personally experienced increased food prices (vegetables, fruits, etc.) in June 2023 compared to May 2023 both in Colombo and Point Pedro.”