-By Shantha Jayarathne -Former Senior Consultant(SLIDA)
(Lanka-e-News - 07.July.2023, 6.15PM) On Saturday, the Sri Lanka parliament approved President Ranil Wickremesinghe's domestic debt restructuring/optimization (DDR) plan, delivering a devastating blow to the pension funds of millions of workers, primarily those invested in the Employee Provident Fund (EPF). Despite the detrimental impact on hardworking individuals, the plan was endorsed as part of the government's ruthless implementation of the International Monetary Fund (IMF)-dictated austerity program.
Under the proposed DDR, the Treasury will retrieve existing bonds in which superannuation funds like the EPF have invested and issue new bonds through a step-down process. However, the new bonds offer significantly lower interest rates compared to prevailing rates. For instance, recent years have seen interest rates on government treasury bonds surpass 30 percent. This means that pension funds, including the EPF, will not receive the higher returns they rightfully deserve.
President Wickremesinghe, through an extraordinary gazette issued on Monday, granted authority to the secretary of the finance ministry to convert or exchange any stock or securities issued in Sri Lanka from June 28, 2023. This move empowers the government to manipulate the funds of the EPF, a pension scheme relied upon by 2.6 million workers. The government's actions are being carried out behind the backs of the very individuals whose futures are at stake.
Independent think tank Verite Research estimates that, even based on a conservative average interest rate of 13 percent, the EPF stands to lose a mind-boggling 12 trillion rupees ($US39 billion) by 2038. This projected loss further highlights the severe consequences of the government's DDR plan on the financial security and well-being of hardworking EPF members.
The EPF, predominantly managed by the Central Bank, holds approximately 3.5 trillion rupees ($US11 billion) in government securities, making up nearly a quarter of the country's domestic debt. For workers, the EPF represents their only hope for settling loans, mortgages, and other financial commitments, and it plays a critical role in building a secure future for their families after retirement. By targeting the EPF and neglecting the interests of its 2.6 million workers, the government is perpetuating a grave injustice.
As the Sri Lankan government prioritizes implementing the DDR plan to secure the next IMF loan tranche, it is the hardworking people, especially the EPF members, who are left to bear the burden. The loss of billions of rupees from their pension funds, coupled with inflation and currency depreciation, further erode the value of their hard-earned savings. This unjust sacrifice highlights the government's failure to justify the losses inflicted upon the very individuals who form the backbone of the nation's economy. It is high time that the voices of the working people are heard and their interests are given the priority they deserve.
Former Senior Consultant
Sri Lanka Institute of Development Administration
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by (2023-07-07 12:58:02)
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