(Text of Jaffna District Parliamentarian M. A. Sumanthiran’s speech in Parliament on 1 st July 2023 during the Debate on Domestic Debt Restructuring )

Thank you, Hon. Speaker, for the time allocated to me to participate in this very important debate today.

As I begin, I wish to bring to the notice of this house and to the country the several false holdings that the government has been making to the country with regard to this Domestic Debt Restructure.

We have one State Minister of Finance on record, just three weeks ago – no, not yourself, the other State Minister, saying categorically that there will not be any domestic debt restructure. But in the cabinet memorandum that we have that has now been placed before this House, the cat is out of the bag, because in pages, 2 and 3, it says “priority”…I’m reading from page 3 of the cabinet memorandum the first line “…priority being the implementation of the DDO described here in domestic debt optimization and then in parentheses, it says, “which is also a stated precondition” – stated precondition! for the restructuring of FLFC, debt owed to the members of the ad hoc committee holders of Sri Lanka’s International Sovereign Bonds. So now we are being told that there is a precondition with the international sovereign bond holders that there will be a domestic debt restructuring and therefore this must be done first – this must be done first.

Priority for the implementation of DDO! So all this time, you have lied to the country saying there won’t be domestic debt restructuring. At least important, responsible – ought to be responsible – State Minister of Finance has said that, but that is not the case. Even while he was saying this, you had agreed with that ad hoc committee that first you will do a domestic restructuring and it says “stated”, so obviously, it is in writing as well.

Undertaken in writing to first do the domestic debt restructuring. You’ve been lying to the country that, either it won’t be done or that you have not taken a decision with regard to that up to now.

Our main objection to this restructuring plan is the impact that it will have on members of the EPF and ETF. These are the voiceless working class of the country. I say they are voiceless because even with regard to their own savings, they have no say; they can’t make the decision; It’s absolutely false when you say that this is voluntary participation.

The Honourable leader of the opposition explained that, so I am not going to elaborately go into that matter. The EPF Act says that the custodian is the monetary board. The monetary board members, Mr. Nihal Fonseka, Mr. Sanjeewa Jayawardene and Mrs. Rani Jayamaha graciously attended the two long sessions of the Committee on Public Finance.

But I want to ask them: Are you being responsible custodians when making this decision on behalf of 2.5 million members – working class members of the EPF?

Yesterday, we had the superintendent of EPF tell that committee that they don’t even know what this restructuring plan is. They have not even being given. He said he saw it on Facebook. That is the extent to which this enormous – this onerous responsibility cast is being exercised. We heard one member of the Monetary Board say, “this is an important thing, this is a very serious thing; all of us can be dragged and hanged for doing this.”

He has understood the enormity and I want to put them on notice: that is what will happen to them if they dare take this decision of participating in this debt restructuring exercise without consulting the membership. Now it’s not a big thing to consult the membership today, we can do a survey. If it is to be voluntary, it must necessarily have the consent or at least some views of the membership of the EPF, otherwise it is not voluntary. Don’t lie to the country, don’t lie to these people that they are voluntarily participating in this matter.

Now, the Honourable Prime Minister, a moment ago said that the amount lying to the credit of EPF is Rs.3.5 Trillion. The Central Bank accounts published end of last year says its Rs.3.4 Trillion. So it is around that amount. Now we are unable to say this from any published account of the EPF, because EPF does not publish their annual statements on time – at one point, for six years they hadn’t published. Now they have published up to 2020, but 2021 and 2022 annual reports are still not with us.

They have just now, because these questions will be asked, they have published the financial statement. In the financial statement again, they have misrepresented something to the country and it is a very serious misrepresentation. I asked them this yesterday at the meeting, they said, “give us 10 minutes to respond to you” and even after an hour they had no response.

And this is the issue: EPF law says they must publish the face value, purchase price, and market value of each of the investments – each of the Investments – that those are the words in the law. But in their financial statement, they say, the law requires us to publish the face value, purchase price market value of each type of investment.

They have changed. It’s a false statement; false statement of what the law requires them to do. When that question was asked they had no answer to give. This body is lying through their teeth. When the law specifically says, each of the Investments, they are saying that the law says each type of the investment. Is this the body that can be trusted to be a proper custodian?

And we have a history of EPF. Through bond scams, through various methods EPF has been eaten into, you have always stolen from the EPF. All these platitudes from the Honourable Prime Minister falls flat on their face, because its always the EPF and ETF that you have dipped your hand into. Because they are voiceless, they are working class and its easy for you to do this and you don’t give them a voice. You don’t give them a voice, you appoint the Central Bank, the monetary board to be the custodians who make decisions on their behalf. This restructuring plan is theirs, restructuring plan come from the treasury and the central bank. Same very people, very same people who make a decision on behalf of the EPF. There is no voluntariness at all.

Now government is able to publish on each of the Investments of the foreign debt holders, why? Because they insist on it, but EPF? you don’t do that, but thanks to that, that publication we are able to tell you that the weighted average return of the entire treasury bond holding of the government today is 13.52%. 13.52%, that’s our calculation. And what are you assuring?

The EPF? 9.1%. When the weighted average is 13.52 %, you are saying in 2038 the EPF we get a return of 9.1%. Well I’ll come to the loss to the EPF.

We have repeatedly asked the central bank to share with us the net present value loss to the EPF and they have not given to us, but it’s easily calculable, easily you can calculate that and I’m saying with responsibility, the Net Present Value as at today, if you take the Net Present Value today, the loss to EPF holders will be 47%. The loss to EPF holders will be 47%, that is the Net Present Value loss to the EPF. Since the EPF is the single largest holder of the government bonds – over 40% – we expect the EPF to have the same overall yield as the stock of the government bonds, which will be at 13 .52%.

In this debt restructure, the government is proposing to limit the yields to 9.1% for 16 years. For 16 years! the implication of this is this: Even if the current EPF members put no more of their money to the EPF and just allow their current holding to grow for the next 16 years at the current yield of 13.52%, which is 3.4 Trillion today, it would have grown to 25.7 Trillion, whereas at your 9.1% it’ll only grow to 13.6 Trillion. The loss is 12.1 Trillion. You are stealing from the EPF, I repeat, you are stealing from the EPF 12. 1 Trillion for this debt restructure. You can hide this by saying “oh we can’t say how it’ll be16 years hence”, right.

But today from the current market value of the current weighted average, its 13.52% and you are assuring 9.1 in 16 years’ time. Is it this that this House wants to do?

That’s the question. When you have let go all the private bond holders who lend to the government after we declared bankruptcy: in August and September last year, they bought bonds at very high yield. 20%, 22%, 25% you are not touching any of those, you’re not touching any of those that amounts to 15% of your local debt, you’re not touching it because those are your friends. Those are the ones who do bond scams for you. They are the ones who fund your election campaigns.

That is why you’ve let them off the hook and whom are you taxing? The EPF holders will have half their value? 47% is about 50%, it will be cut down to half their value when they take this. See I can demonstrate it this way: If an EPF member who had 1 million today in his account, if he invested that 1 million and got an average yield of 13.52, what is the gain that he gets? He gets less than half.

Whereas the Coupon holders who invested in August and September, if they put 1 million, every six months they get hundred thousand rupees, 20%. Every six months they get Hundred Thousand Rupees for a million investment, while the working class, and who is the working class? Those are the poor women in this country – those who work in the garment trade, the poor tea pluckers in the estates and I want to ask, Hon. Jeevan Thondaman: with what conscience are you supporting this debt restructure?

When all those women tea pluckers who stand to lose, who have lost so much, who stand to lose so much more. They are the backbone of the country’s economy and they are the ones you have chosen to trample under your feet, yet again, because it is so easy to do that.

If you touch the private bond holders, the explanation given to us by the Central Bank is that’s not enough. Maybe that’s not enough, but first take that. Why don’t you take that first?

At least give a message to the country that people who have earned by lending to the government, money. Money market players, primary dealers, that’s their business. For decades they have earned so much. And on the economic crisis, because of the economic crisis, they got very high yields. These are like vultures because the country was in economic crisis, they lent for a very high return and they get every cent of their return. You don’t touch them. You dare not touch it because they’re your friends, they are your funders, they are the ones who give you your election campaign money. They are the ones who give you kickbacks for doing this. So you are selling the soul of the country.

You are trampling underfoot those who have no voice because you have made the monetary board their voice. And again I want to tell the monetary board, if this is what you do, this is what you do to the working class of the country. You will be the ones exposed before that country.

You dare not do this. You are given 21 days from the 4th of July, apparently, to make a voluntary decision. But you make that decision on behalf of 2.5 million working class people of this country and you make the wrong choice, you’ll be the ones who will have to bear the brunt of the people’s wrath
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Thank you.

Hon. Shehan Semasinghe –

I just want to make one point, as you know it was made very clear, the Central Bank will do a launch on the 4th. It was very clearly specified. But also in this same presentation which committee insisted that it should be included in the resolution, it is very clearly has given a couple of options to the EPF and also indicated what the repercussions are going to be. So based on that, the EPF can come back to the central bank, when we publish the DDO, when they do the launch, and decide on the options given, So based on the assumptions Mr. Sumanthiran, I think on the matter that you are speaking, I don’t know if you want the inflation to be at 7% ? because if inflation is going to be on 70% the interest rates will also be at a higher rate.

So I really don’t know on which ground and which assumptions you are making these statements.

Hon. Sumanthiran:

All that I am raising is, who makes these decisions on behalf of the EPF? Don’t call it voluntary, be straight forward and say that we are making these decision on your behalf.

Don’t say they are making it voluntarily because the monetary board is making the decision, and it is the monetary board that has accepted this debt restructuring plan. You’re holding a gun to their head, and you are saying: you do this or 30%.

Even if they pay 30%, the calculation will show that they stand a better chance. They get a better yield even if they pay 30%. The calculation will show that they stand a better chance, a better yield even if they pay 30% than agreeing to this debt restructure.

Now, you can’t hold a gun to their head and say the country’s economy has collapsed, therefore we will take from you. You choose them, You always choose the people who have no voice. You take it from them, and you make the decision and you even have the gall to call it voluntary. They are not consulted at all.

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