A Sri Lankan parliamentary panel yesterday called for the criminal prosecution of former central bank chief Arjuna Mahendran who was removed three months ago over long-running allegations of insider trading.
A Singapore national of Sri Lankan origin, Mahendran was accused last year of leaking inside information to his son-in-law’s firm, allegedly allowing it to make millions of dollars in profits from central bank bond auctions.
The scandal came on the heels of a mounting debt crisis in Sri Lanka - the country secured a $1.5bn bailout from the International Monetary Fund in July.
A bipartisan oversight committee yesterday demanded legal action against Mahendran and his son-in-law.
Sunil Handunetti, chairman of the Committee on Public Enterprises (COPE) said evidence brought before it had raised reasonable doubt that Mahendran should be held directly responsible over the bond transaction amounting to millions of dollars.
Presenting the COPE report to parliament, Handunetti said legal action should be taken against Mahendran and other responsible individuals.
He said Perpetual Treasuries, a firm connected to Mahendran’s son-in-law, made
enormous profits from the deals.
The committee recommended that action should be taken to examine and recover any losses to the state and central bank.
The central bank should also conduct its own probe and come up with procedures to make auctions transparent, the committee said.
Prime Minister Ranil Wickremesinghe said the government will respect the report and proposed that it be sent to the attorney general for further action.
The joint opposition, stanch supporters of former president Mahinda Rajapakse, has called for a debate in parliament on the contents of the report.
Mahendran was appointed as Sri Lanka’s central bank governor by President Maithripala Sirisena in January 2015.
The president sacked Mahendran in July, bowing to public pressure, and asked the legislature to investigate the allegations against him.
An ad-hoc ruling party committee had cleared Mahendran of direct involvement last year, but civil society activists pressed for a thorough investigation resulting in the parliamentary panel launching an extensive probe.
Mahendran has consistently maintained his innocence.
Meanwhile, Sri Lanka has dropped one place in the World Bank’s ease of doing business index despite adopting some key reforms, the bank revealed on Thursday.
“Over the past year Sri Lanka made progress in two reform areas that are covered by the Doing Business report, namely Starting a Business and Protecting Minority Investors,” a World Bank statement said.
“The improvements, while important, were not enough to stop a decline in the country’s overall rank from 109 in 2016 to 110 in 2017.”
However, the World Bank said this was not necessarily an indicator that the country has slipped down in rank, but more a reflection that other peer economies have undertaken a larger number of reforms in the business environment during the same period.
“Simplified processes will reduce the cost of doing business and can help to unleash entrepreneurship, which is needed to boost the economy,” said Idah Pswarayi-Riddihough, World Bank country director for Sri Lanka and the Maldives.
“While Sri Lanka has taken positive steps in reforms, much needs to be done to enable the private sector to grow and to provide equal opportunities for all.”
A total of 11 reforms, making it easier to do business, were implemented by five of eight economies in South Asia in the past year, significantly higher than the region’s annual average of nine reforms over the past five years.
Over the past 12 months, it implemented a total of three reforms and saw its ranking progress from 148 to 144.