Mahendran decided to raise Rs.10 bn through public auction only after Feb. 27 auction closed

Published : 9:15 am  September 21, 2017 | No comments so far |  | 

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  • A meeting of the Monetary Board on Feb 24, 2015 discussed raising government funds through public auctions and the issuance of thirty-year bonds
  • Several discussions had taken place about Private Placement versus Public Auction methods at a very high level of the government

 

 

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Mahendran: At the first Cabinet meeting of the new government the Prime Minister had specifically said these procurements should be carried out in a transparent manner. So I interpreted that it meant the issuance of bonds as well. Subsequently, I confirmed this with the PM on February 24, 2015 during a Cabinet subcommittee meeting on economic affairs.

 

 

By Shehan Chamika Silva

Explaining why he decided to raise funds through public auctions particularly with regard to the February 27, 2015 auction, former CB governor Arjuna Mahendran yesterday continued to testify before the PCoI.   

He said there was a meeting of the Monetary Board on February 24, 2015 at which raising government funds through public auctions and issuing thirty-year bonds were discussed.   


Mr. Mahendran said after seeing that Rs.20 billion had been bid at the February 27, 2015 auction he was relieved, considering the urgent government fund requirement. At that point, at noon on February 27 after the auction, he had decided to raise funds from that auction and not to go for the Private Placement Method (PPM).   


He said there were several discussions on Private Placement versus Public Auction methods at a very high level of the government, several weeks before the February 27, 2015 auction.    “I was given a very clear signal by the Hon. Prime Minister that all CBSL procurement should be done in a transparent manner in the light of the new government’s policies,” Mr. Mahendran said.

  
He said, “In the first Cabinet meeting at that time the Prime Minister had  specifically said that these procurements should be done in a transparent manner. So I interpreted that it meant the issuance of bonds as well. Subsequently, I confirmed about this with the PM on February 24, 2015 during another cabinet subcommittee meeting on economic affairs.”   


Mr. Mahendran said it was in this backdrop that he preferred raising funds solely from the February 27, 2015 public auction.   


It was also explained that on March 6, 2015, Mr. Mahendran had conveyed this decision to the Monetary Board and thereafter, the CBSL had started raising funds through treasury bonds only from auctions.   


Concluding his evidence, Mr. Mahendran said he had not transferred any CBSL officials with the intention of helping Perpetual Treasuries or to help him or Arjun Aloysius.    Thereafter, Counsel Harsha Fernando who was appearing on behalf of former Deputy Governor, P. Samarasiri, questioned Mahendran on the February 27 Auction, 2015.   


Mr. Fernando questioned him on the 5% penal rate cut and the decision of the Public Debt Department (PDD) to accept Rs.10 billion at the auction.   


It was said that Mr. Mahendran was facing significant pressure to find money for the Government by the end of February 2015.  

 
It was also explained that after the discussion with Dr. Weerasinghe at the MOC (Market Operation Committee) meeting on February 27, 2015, morning, Mr. Mahendran had decided to remove the 5% penal rate considering it an urgent requirement.   


After the February 27 auction finished at noon, Mr.  Mahendran had discussed with the PDD officers in the presence of two other Deputy Governors to accept Rs.10.05 billion from the auction. Later that recommendation went to the Tender Board for approval.

  
Mr. Mahendran said he was aware by the time he was discussing with PDD that there was a removal of 5% penal rate and it would affect the interest rate and it would increase at the auction.    It was revealed that when Mr. Mahendran was discussing with the PDD, Deputy Governors Ananda Silva and Dr. Nandalal Weerasinghe were with him. Ms. Seneviratne (Superintendent of PDD), Dr. Asim (Addl. Director of PDD) and Ms. Muthugala (Add.director of PDD) were also part of that discussion.   

 

In the first Cabinet meeting at that time the Prime Minister had  specifically said that these procurements should be done in a transparent manner. So I interpreted that it meant the issuance of bonds as well. 
Subsequently, I confirmed about this with the PM on February 24, 2015 during another cabinet subcommittee meeting on economic affairs.

 


It was revealed that these three PDD officers were also members of the Tender Board.    When Mr. Mahendran decided on the removal of the penal rate with Dr. Weerasinghe, there were three other members who were also part of that MOC meeting. They are Mr. Karunatilleke, Ms. Swarnakularatne and Mr. Rodrigo.   


These three members were also members of the Tender Board. It was said that the Tender Board comprised eight members. The other two were Deputy Governors Sepala Ratnayake and P. Samarasiri who were not members of the PDD or MOC.   


Referring to the two events — the removal of penal rate and the PDD’s decision to accept bids up to Rs. 10 billion — Counsel Harsha Fernando said those two incidents would not have taken place without the Governor’s involvement.   

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