Budget 2022: Budget transfers ‘black’ profits of Perpetual Treasuries to govt. coffers

ECONOMYNEXT-  Finance Minister Basil Rajapaksa presenting his 2022 budget on Friday (14) transferred 8.5 billion rupees earned by Perpetual Treasuries, alleged to be involved in a 2016 bond scam, to Treasury coffers on the grounds of the company breaching the Central Bank’s best practices code of conduct.

The move came as the cash-strapped government desperately looked for revenue to boost post-pandemic economic revival.

The finance minister said that according to the report of the Presidential Commission of Inquiry into the scam, Perpetual Treasuries Limited has made this profit mainly through “price-sensitive inside information” and “market manipulation”.

“Therefore, this report identifies that Rs. 8.5 billion is (as bee) received by willfully violating the provisions of the code of conduct on best practices issued by the Central Bank of Sri Lanka under the Registered Stock and Securities Ordinance No. 07 of 1937, to the primary dealers,” Rajapksa said in his budget speech.

“According to the recommendations of this Commission, and without hindering the legal actions taken by the Attorney General, it is proposed to transfer to the Treasury the Rupees 8.5 billion that the Perpetual Treasuries Limited has earned in violation of the Code of Conduct of the Central Bank of Sri Lanka.”

Perpetual Treasuries, a Central Bank licensed primary dealer in government bonds’ activities were suspended on several occasions after a bond scam that ran between 2006 to 2016 came to light.

The company was owned by Arjun Aloysius, the son-in-law of ex-Central Bank Governor Arjuna Mahendran who held office in 2015-2016.

A Presidential Commission of Inquiry found that Mahendran had interfered in a bond auction and benefited from leaked inside information to help his Perpetual Treasuries make billions of rupees in profits.

Mahendran raised a policy rate floor outside the regular monetary policy meeting and pressured a tender board to sell bonds at high prices, the inquiry found.

The inquiry also found that Perpetual Treasuries had paid Central Bank dealers who were managing the country’s largest pension fund to buy bonds at high prices and had influeced other state funds.