Kanchana Wijesekera

MP Kanchana Wijesekera misidentifies beneficiaries of bond transaction losses


In this statement made on 30 January 2020, UPFA MP Kanchana Wijesekara claims that 96% of the losses caused to the government treasury, through bond transactions from 2002-2015

Daily News | January 30, 2020



Fact Check

In this statement made on 30 January 2020, UPFA MP Kanchana Wijesekara claims that 96% of the losses caused to the government treasury, through bond transactions from 2002-2015, were accrued to government institutions—thus negating the materiality of the loss.

To assess this claim FactCheck consulted Report 1 (of the 5 reports) from the forensic audit at the Central Bank of Sri Lanka (CBSL). It investigates the issuance of treasury bonds from 1 January 2002 to 28 February 2015.

Counterparties to the transactions are reported only for losses attributed to the sale of bonds through “direct placements” (not auctions). The term ‘direct placement’ refers to the practice of offering bonds over the counter directly to the investor (i.e. without an auction). According to the report a total loss, LKR 10,471 million can be attributed to direct placements.

Contrary to the MP’s claim, government institutions are the counterparty to only 34.22% of the LKR 10,471 million. The 96% claim derives from incorrectly counting the EPF as a government institution. EPF funds are designated in individual accounts that belong to private citizens in formal employment, not the government; CBSL and the Department of Labour act only as a custodian and administrator of the fund, respectively.

Consequently, all financial benefits and losses to the EPF are reaped by its members rather than the government. Furthermore, the active members of the EPF only account for one-third of the working population. Meanwhile, non-members include informal sector workers ranging from trishaw drivers to construction workers, and workers in the agriculture sector to the fisheries’ sector; as well as over two-thirds of Sri Lankan women, who are not employed, and the elderly, who have retired from employment.

Furthermore, it cannot be claimed (without more information than what is available in the forensic audits) that government institutions, and not private parties, were the sole beneficiaries of those transactions amounting to 34.22% of the estimated loss to the government. This is because government banks as primary dealers could have carried out the transaction on behalf of private parties. For example, while investigating the 2015 February bond scandal, the parliamentary COPE committee identified the private company Perpetual Treasuries as the beneficiary for 60% of the bond value transacted by the Bank of Ceylon – which acted as a proxy for the private company.

The MPs claim is that 96% of the losses caused to the government treasury, through the 2002-2015 direct placement bond transactions, were accrued to government institutions, thus negating the materiality of the loss. This is not a credible claim, on two counts. First, only 34.22% were transacted by government institutions (the EPF does not belong to the government); second, there is no information to suggest that those government institutions were not, at least in part, transacting on behalf of private parties, as they have been known to do.

Therefore, FactCheck classifies this statement as FALSE.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment. 

Additional Note:

This FactCheck does not address the question of estimating the net gain/loss to government institutions through ‘direct placements’. Report 1 used in this analysis only evaluates the ‘direct placements’, for which third parties are assessed to have ‘under-paid’ the government. It is possible that there were other ‘direct placement’ transactions for which third parties (mostly government managed institutions) over-paid. These were not evaluated in Report 1. For example, Report 2, which investigates the primary and secondary market transactions of the EPF in treasury bonds, mentions that the EPF lost LKR 9,047 million by purchasing bonds at lower yield rates — that is, by overpaying for the value of the bond. Therefore, although the EPF gained LKR 6,417 million from one set of direct placements, it also lost LKR 9,047 million from another set of direct placements and auctions in the primary market.

*Corrections and Updates – 05 March 2020: The previous version of the fact check only included that the EPF suffered a loss of LKR 9,047 million through direct placements. The fact check has been updated to reflect that the loss incurred by the EPF was in relation to primary market transactions, which includes direct placements and auctions.

Exhibit 1: Losses to the Treasury through direct placements by primary dealers 



  • BDO India, Central Bank of Sri Lanka, Report 1 Investigation on Issuance of Treasury Bonds from 1 January 2002 to 28 February 2015 by the Public Debt Department (November 2019), p. 23, 24, 25, 148, click here to access Report 1 [last accessed 4 March 2020].
  • BDO India, Central Bank of Sri Lanka, Report 2 Investigation on Primary and Secondary Market Transactions Of EPF In Treasury Bonds From 1 January 2002 To 28 February 2015 (November 2019), p. 29, click here to access Report 2 [last accessed 4 March 2020].
  • Committee on Public Enterprises, Report of the Committee on Public Enterprises which functioned as a Special Committee to look into financial irregularities which have occurred in issuing of Treasury Bonds from February 2015 to May 2016 by the Central Bank of Sri Lanka, Parliament Series No. 109 (October 2016), p. 29, available at: https://www.parliament.lk/uploads/comreports/1478667396060758.pdf#page=1 [last accessed 4 March 2020].
  • Parliament of Sri Lanka, Employees Provident Fund Act No.15 of 1958 incorporating amendments from Act No.18 of 1965, Act No. 16 of 1970, Act No. 8 of 1971, Act No. 24 of 1971, available at: http://www.epf.lk/assets/library/amendments/act_of_1958.pdf [last accessed 4 March 2020].