Indrajit Coomaraswamy arriving at the Commission. Picture by Wimal Karunatilaka
Central Bank Governor Indrajit Coomaraswamy said yesterday that he was surprised by the ad hoc manner in which the Central Bank Treasury Bonds have been issued in the past.
The CBSL Governor was testifying before the Presidential Commission of Inquiry to Investigate and Inquire into the Issuance of Treasury Bonds.
The Presidential Commission comprised of Supreme Court judges Justice K.T. Chitrasri , Justice Prasanna Jayawardena and Retired Deputy Auditor General Kandasamy Veluppillai. Asked on how frequently treasury bonds are issued, CBSL Governor said that there is no certain pattern or time frame to issue a treasury bond.
They are issued as required, he said.“Now we are trying to move into a planned out structure for the issuance of treasury bonds. We are also trying to move into an annual auction calendar as well.” he also said.
CBSL Governor Coomarasamy was yesterday summoned by the Presidential Commission of inquiry to Investigate and Inquire into the Issuance of Treasury Bonds as the first evidence to the controversial CB Treasury bond issue.
President’s Counsel Senior Additional Solicitor General Dappula de Livera and Senior State Counsel Shaheeda Barrie lead the evidence.
CBSL Governor Coomaraswamy also said, had he been in office when the controversial CB bond issue took place, he would have recommended using auction method rather than direct placement method when issuance of bonds.
CBSL Governor Coomaraswamy made the observation when he was cross-examined by the Senior State Counsel Shaheeda Barrie as to who is responsible to decide on a method, direct placement method or otherwise, to issue a treasury bond.
Coomaraswamy said that he is unaware as to who decided on the method of issuing the bonds with regards to the issue at hand.
The decision may have come from the Domestic Debt Management Committee (DDMC) or the Monetary Board, CBSL Governor said.
He also pointed out, usually, a CBSL Governor only sees into the outlining of the information regarding an issuance of bonds but does not usually get involved in the process. At present, the Governor of Central Bank is not involved in the issuance of treasury bonds at all, Coomaraswamy also pointed out.
When asked on a historical basis, who usually would have taken the decisions on issuance of bond within 2015-2016, Coomaraswamy said the DDMC may have taken the initial decision to issue the treasury bonds.
Asked could the Monetary Board have taken the decision within the same period, the Governor observed that in 2008 there was an occasion recorded where the Monetary Board has taken the decision of issuing treasury bonds.A question was posed by a member of the Presidential Commission, Judge of the Supreme Court Prasanna Jayawardena, on a meeting held on February 27, 2015. He questioned as to how it seems that bonds worth one billion rupees were issued at an auction on the same day the aforesaid meeting that technically should be preceding a treasury bond issuance.
CBSL Governor Coomaraswamy replying to the question said he is unable to give an answer since there is need for some clarification on the said event.
He also suggested the meeting held on the February 27,2015 may have been on bond issuance for the month of March 2015.
However, he said he is unable to answer since he needs more clarifications on the matter. The Counsel assisting the Commission of Inquiry proposed the Presidential Commission to summon the officials who held office in the time period referred to before the Commission. Asked if the Central Bank monitor the bond trading secondary market CBSL Governor said from September 2016 the CBSL is monitoring the secondary market. Before September 2016, there was no way for the CBSL to receive real-time information on the secondary market, Coomaraswamy explained.
CBSL Governor Coomaraswamy also said the main objective in the issuance of treasury bonds is to acquire loans for the government with a minimum cost to the government. CBSL Governor said the primary auction transactions were settled by script until 2004, which was then done by an electronic system.
The Presidential Commission of Inquiry to Investigate and Inquire into the Issuance of Treasury Bonds will meet today at 10 am.