October 15th 2016 (POYA)
Dear Eminent Sirs,
DON’T SEEK TO PUT BLAME ON OTHERS UNTIL YOU ARE BLAMELESS
The reports in this morning’s press arising out of your long awaited meeting yesterday, frankly, did not amount to a “HILL OF BEANS”. I would have liked to have seen some leadership emanating from your goodselves, at this crucial moment.
Frankly you all appear to act like pre-school kids, taking a cue from the parliamentarians, who act like a motley collection of “ata pass” survivalists! Trying to decide on the future course of Sri Lanka for the next 50 years, when the next 12 months seems to be a stretch!
Firstly, may I remind you of your primary responsibilities; which are to guide the Policy of the Central Bank, in as much as it relates to Monetary Policy, namely, the exchange rate, interest rate and management of public debt. It is important that these actions give confidence to the international community, so that our Sovereign ratings are enhanced, which will result in lower interest payments on debts, and the ability to borrow at lower rates in future. It is timely to remind you that many countries’ Central Banks currently borrow at near ZERO INTEREST RATES.
Needless to say the actions of the treasury ALSO has an impact on the above, and they must in turn manage fiscal policy, budget deficit, and public spending in balancing the best interests of the Sri Lankan people within Govt. policy.
Frankly, it is NO secret that both arms have failed miserably with regards to this over a very long period, and scapegoating of those without is not the way to go. The crisis we are faced is NOW CRITICAL because of the profligacy of the previous administration, where the excess borrowings incurred has not been able to provide a public return on capital investment, and the use of long term funding to meet recurrent expenditure.
Having explained these basics, your primary role today is to know how to manage the extraordinarily large Public Debt in a manner that is least painful to the Sri Lankan people who will eventually have to repay this increasing liability over many generations to come.
Unfortunately you must have the courage to pull up the fossils in the Public Debt department who acting as neophytes are making an almighty mess of the job they have been given. It is for you to determine if this is willful, or incompetent.
In my opinion, I believe the whole department MUST be replaced by professionals from outside, and even foreign assistance in order to better manage this aspect, and even obtain the assistance of proven consultants, who are capable of designing a system that is simple to operate and manage the revolving debt. (the ability to refinance borrowings when they fall due, at the lowest possible rate of interest)
It is most important to have this fully operational when the massive refinancing activity is required in 2018 and 2019 when we have to meet capital repayment of large foreign loans.
“Given this background, let me come to the main point I am trying to make here”
It is a blind leading the blind mentality in the CBSL situation now. You have JUST ONE primary dealer, who has identified a weakness in the system, employed the best professionals in the Country, pay them more than your Governor, and who merely take advantage of your own incompetence.
I am very sorry to say that the other primary dealers do not have the same vision, particularly the arms of the clearing banks which have access to far greater funds are NOT bidding! This leads Perpetual Treasuries to take the risk, and reap the reward. Why? The head of PD at the Bank of Ceylon probably has a comfortable remuneration package, whether or not he makes any Bond Dealing profits. Why should he break a leg to work hard and take risks? In this case BOC a state owned enterprise, instead making additional billions in profits for the people of Sri Lanka, lend money instead to Perpetual Treasuries, with full collateral to make money.
Therefore instead of finding fault with the performers, it is time to find fault with those who have failed to perform! Wouldn’t that make a change in thinking? That is the mindset of the 21st Century, and it is time some YOUNG blood is infused into your ranks to be aware of, and retake the MISSED OPPORTUNITIES.
You, collectively have been faced with an untenable situation, where the Media, has grossly misinformed the public due to ignorance of how these systems work, who are then baying for blood. You MUST find fault squarely with the CBSL and its current practices that are outdated, and also the GOSL owned Banks’ current risk averse strategies that are a drag on this economy. You MUST force the clearing banks to reduce spread. That is the ONLY way to grow this economy. That is the single biggest reason for the lackluster performance of the Sri Lankan economy to date, and in NOT taking a loan to buy sophisticated machinery in a company I run is a small micro result of this bad policy.
So please have the courage of your convictions to do what is right, and NOT be partial to here say. What we need in Sri Lanka is excellence, leadership and competence. In my opinion that is the problem with the CBSL, due to its hiring policies that need a drastic change. Sometimes brilliance only lasts 4 years in one’s life, and we have lifers in the CBSL keeping desks warm, worse costing the economy trillions due to their unwise action or inaction!
We as a country cannot afford baggage. We MUST have the best of the best seconded to the CBSL for a maximum of 4 years in the prime of their lives, to do the job and be paid for performance. You will see instant results.
By this show of incompetence, you have now raised the bar. If the CEO of Perpetual Treasuries gets a bonus of Rs500M due to your errors, then it will cost you more to get the best. Remember it is NOT Perpetual Treasuries fault for making profits, it’s the CBSL fault for making it so easy for them. If I had the same access to the funds, so could I do the same, and I am no relation or friend of Arjun Mahendran!
After having read what I have to say, if you believe you are not up to the task, and we understand that, please resign and handover your position to someone who is up to it. I know sufficient independent knowledgeable people who can take your place there, and are able to direct the operations of CBSL in the BEST INTERESTS OF SRI LANKA. This is NOT a sinecure, it is a real JOB.
The future of the Country is at stake and it is your call we are heeding.
From the forests of Sri Lanka in basic accommodation with no electricity either.