The Domestic Debt Restructuring was a damp squib bordering on fraud. The Debt restructuring should have been extended for all to improve debt sustainability and equity. No educated business analyst can fathom why they left out even those outside the banking sector for they are going to make a killing. Overnight several bond kings have now been created . What was the crazy reason to raise 10 year bonds and issue them at 30 percent? People were jailed for doing it at doing 5 y bonds at 11% .The yields the buyers expected to be reprofiled but they have been left out ( unbelievable )- on what grounds is this justified? Someone must go to court . The sorry saga started with the CBSL default. That made Sri Lanka a bankrupt nation . To date no action has been taken against Nandalal Weerasinghe for this arbitrary decision . Further, the differential tax justification does not make any sense – epf being taxed at 14 percent hence they needed to be reprofiled makes no sense. Banks paying 50 percent is incorrect – corporate tax rate is 30 percent and financial vat is 18 percent. So banks are not excessively taxed as implied. As for moratoriums they did accommodate many borrowers but what other choice did they have – if they foreclosed the recovery value would be very low for liquidation yields lower recovery and if such a large number of businesses were to be foreclosed on the asset sales would have crashed the collateral market – land, cars and businesses.
Crazy Interest Rate Policy
The CBSL in a crazy way doubled borrowing rates overnight . SMEs we’re forced borrow at over 30% . In addition penalties we’re charged . People were willing to stomach it because they expected a haircut on the coupon or deposit rates because of the crazy interest rate policy of CBSL. It was done Nandalal publicly said to control inflation . When we were effectively importing inflation . The inflation creation was not within the country. The DDO therefore very surprisingly did not touch the TBs or the Bonds. Now imagine the money a few people will make at the expense of the tax payers, SMEs and the public. CBSL interest policy has effectively destroyed the livelihoods of over 500000 people according to estimates and destroyed over 25% of the SMEs, all for nothing. The opposition was hanged publicly for unfair bond trading . What do you call this stupidity ? Who is behind this? They must be named and shamed. The crazy interest policy of the CBSL starting from the sovereign default last year to the crazy interest rates to DDR . These actions must be investigated by a commission. The 2022 interest rate policy of the CBSL was the craziest policy intervention in the history of the CBSL. To add to this Member of Parliament Dayasiri Jayasekara revealed that another big bond fraud was committed by closing the banks on Friday . He also stated that some people have earned 2 billion dollars by raising the price of 30 cents to 47 cents in the international bond market. This allegation may be hard to prove given the limited understanding of our politicians . A Bond trader Ramesh Shaffter yesterday tweeted that Nandalal Weerasinghe must be made Sri Lankan of the year. How stupid can that be, other than for selfish reasons. Overall whilst the public deposits have been spared . The DDR to be successful should have been well-designed to avoid doing more harm than good and to stop speculation . Should have not been populist . The domestic debt restructuring should have been part of a broader policy package that effectively addressed the underlying economic problems and debt vulnerabilities.
Analyst
