-By Political Correspondent
(Lanka-e-News -27.Jan.2025, 11.30 PM) In Sri Lanka’s history of political missteps, few decisions have left as damaging a legacy as Ranil Wickremesinghe’s appointment of Arjuna Mahendran as the Governor of the Central Bank. This isn’t just a story of misplaced trust—it’s a tale of negligence, possible cronyism, and a catastrophic financial scandal that robbed Sri Lankan taxpayers of billions.
Arjuna Mahendran, a Singaporean national with no prior central banking experience, became a key player in what is now infamously known as the Central Bank Bond Scam. His appointment in 2015, orchestrated by then-Prime Minister Ranil Wickremesinghe, raises fundamental questions about leadership, accountability, and the ethical standards of governance.
This article unpacks the scandal, the questionable motives behind Mahendran’s appointment, and why Wickremesinghe must take responsibility for this costly debacle.
When Ranil Wickremesinghe assumed office as Prime Minister in 2015, one of his first moves was to recommend Arjuna Mahendran—a childhood friend and Royal College schoolmate—as the Governor of the Central Bank of Sri Lanka (CBSL). This decision was baffling on multiple levels:
1. Lack of Experience: Mahendran, while experienced as an investment banker, had no prior expertise in central banking. Governing a central bank requires deep knowledge of monetary policy, fiscal responsibility, and the broader economic landscape—skills Mahendran demonstrably lacked.
2. Foreign Nationality: As a Singaporean citizen, Mahendran was not even a Sri Lankan national. Why would Wickremesinghe entrust the country’s most critical financial institution to someone with no direct stake in Sri Lanka’s future?
3. Cronyism Allegations: Critics argue that Mahendran’s appointment was less about merit and more about personal connections. Wickremesinghe’s friendship with Mahendran raises questions about whether loyalty trumped competence in this high-stakes decision.
Shortly after Mahendran’s appointment, on February 27, 2015, the Central Bank of Sri Lanka advertised the sale of Rs. 1 billion in 30-year government bonds at a coupon rate of 12.5%. The sale was oversubscribed, with bids totaling Rs. 20 billion.
While this might appear as a routine financial transaction, the devil was in the details. Several irregularities quickly came to light:
1. Indicative Rate Manipulation: The initial rate was cited as 9.5%, yet the bonds were sold at a much higher rate of 12.5%, raising suspicions of insider manipulation.
2. Perpetual Treasuries’ Windfall: Perpetual Treasuries, a primary dealer linked to Mahendran’s son-in-law, received an unusually large allocation of bonds. This small firm reaped massive profits from the transaction, sparking accusations of nepotism and corruption.
3. Losses to Taxpayers: The bond scam cost Sri Lanka an estimated Rs. 10 billion (approximately $50 million) in its first phase alone. Subsequent investigations revealed even greater financial damage.
As Prime Minister, Wickremesinghe was directly responsible for appointing Mahendran and overseeing his actions. The bond scam not only revealed glaring lapses in oversight but also cast doubt on Wickremesinghe’s motivations:
1. Why Appoint Mahendran?
Was Mahendran’s appointment a strategic move to exploit the Central Bank for personal or political gain? Critics argue that Wickremesinghe’s decision was reckless, prioritizing loyalty over national interest.
2. Ignored Warnings:
Multiple warnings were reportedly issued about Mahendran’s potential conflicts of interest and lack of qualifications. Why did Wickremesinghe disregard these concerns?
3. Accountability for the Scam:
Wickremesinghe’s defense—that he was unaware of Mahendran’s actions—rings hollow. As the Prime Minister, he had a duty to ensure transparency and accountability, particularly in an institution as vital as the Central Bank.
When the bond scam unraveled, Mahendran fled Sri Lanka and has since evaded justice. Despite an Interpol Red Notice and efforts to extradite him from Singapore, Sri Lankan authorities have made little progress.
The lack of accountability has only deepened public outrage. Why was Mahendran allowed to leave the country in the first place? Could stronger actions by Wickremesinghe’s government have prevented his escape?
Under a potential National People’s Power (NPP) government, there are growing calls to investigate Wickremesinghe’s role in the bond scam. Legal experts suggest that he could face charges for violating constitutional provisions, including:
1. Breach of Fiduciary Duty:
As Prime Minister, Wickremesinghe had a fiduciary duty to act in the best interests of Sri Lankan citizens. His decision to appoint Mahendran—and his subsequent failure to prevent the bond scam—could be seen as a dereliction of this duty.
2. Complicity in Corruption:
While Wickremesinghe may not have directly profited from the bond scam, his actions (or inactions) facilitated an environment where corruption could thrive.
3. Abuse of Power:
By appointing an unqualified foreign national to a critical position, Wickremesinghe arguably abused his authority, prioritizing personal connections over national interest.
For Sri Lankan taxpayers, the bond scam is not just a political scandal—it’s a personal betrayal. Billions lost in public funds mean fewer resources for healthcare, education, and infrastructure.
As one Colombo resident put it: “Why should we trust a leader who hands the keys to our economy to an outsider with no qualifications? Wickremesinghe owes the nation an explanation.”
If the NPP government under President Anura Kumara Dissanayake is serious about restoring public trust, it must prioritize accountability for the bond scam. This includes:
1. Summoning Wickremesinghe:
Wickremesinghe must be brought before a judicial inquiry to explain his decision to appoint Mahendran.
2. Extraditing Mahendran:
Efforts to bring Mahendran back to Sri Lanka must be intensified, with diplomatic pressure on Singapore to cooperate.
3. Recovering Lost Funds:
The government must pursue legal avenues to recover the billions lost in the bond scam, including freezing assets linked to Mahendran and his associates.
4. Legislative Reforms:
Stronger laws are needed to prevent conflicts of interest in public appointments and ensure greater transparency in financial institutions.
The Central Bank Bond Scam is a cautionary tale about the dangers of cronyism, unchecked power, and weak oversight. For Sri Lanka, it underscores the need for:
1. Merit-Based Appointments:
Key positions like the Central Bank Governor must be filled based on qualifications and experience, not personal connections.
2. Stronger Oversight:
Institutions like the Central Bank must operate independently, free from political interference.
3. Public Accountability:
Leaders must be held accountable for their decisions, particularly when they result in financial losses for taxpayers.
Ranil Wickremesinghe’s decision to appoint Arjuna Mahendran as the Governor of the Central Bank was more than a lapse in judgment—it was a betrayal of public trust. The bond scam that followed devastated Sri Lanka’s economy and exposed systemic flaws in governance.
As calls for accountability grow louder, Wickremesinghe must answer the nation’s questions: Why did he appoint Mahendran? What was his motive? And what steps will he take to make amends for the damage caused?
For Sri Lanka, the road to justice begins with transparency. Until Wickremesinghe and Mahendran face the consequences of their actions, the shadow of the bond scam will continue to haunt the nation’s future.
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by (2025-01-27 18:39:49)
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