It was not Central Bank bond scam

I was surprised and sorry to read a journalist attached to The Island writing about a central bank bond scam: surprised because, the editor of The Island, in his inimitable editorials, consistently refers to a treasury bond scam; sorry, because it is simply factually wrong. I have driven home that point several times in The Island and assumed that that canard was dead. Would you permit me to flog a not-so-dead horse?

There never was a central bank bond scam; there could not have been, because there was no market in central bank bonds. The central bank has not issued its own liabilities at least since 1967. The currency notes issued by the Central Bank are liabilities of the government (aanduva/state?) of Sri Lanka. (Should you not clear up that mess confusing ‘state’ with the ‘government’?  It is one thing to have faith in the state of Sri Laska and quite another to have faith in the government of Ranil Wickremesinghe.)  The Central Bank issues those bills (it does currency) on behalf of the state/government of Sri Lanka and they are not the liabilities of the Central Bank or the Monetary Board. There was a scam in government bonds in 2015 as well as in 2016.

As became clearer in the course of the Chitrasiri Commission, the then-governor of the Central Bank and a few other officers of the Central Bank were parties to that financial fraud involving government bonds. The Central Bank is simply the agent of the government/state who markets government liabilities. Those liabilities do not become the Bank’s liabilities. When you carry Sri Lanka currency, you carry liabilities, much like government bonds, of an entity whose credit is low. The Central Bank of Sri Lanka is not in the picture.

Usvatte-aratchi