The Island Editorial

A damning indictment

Thursday 12th November 2015

 

The government seems determined to go ahead with its plan to end the Central Bank (CB) control over the Employees’ Provident Fund (EPF), which it proposes to merge with the Employees’ Trust Fund (ETF) to form a pension fund. Deputy Minister of Foreign Affairs Dr. Harsha de Silva, on Monday, put up a spirited defence in a bid to justify the government proposal.

Dr. de Silva has told the media that the controversial government move is aimed at ensuring more security for the EPF. The government has, by appointing de Silva, who is a professional economist, Deputy Minister of Foreign Affairs and getting him to defend its economic policy, shown a lack of judgment and demonstrated that it cannot even manage its own affairs properly. So, the question is whether it is really equal to the task of ensuring that the EPF and the ETF with a combined worth of Rs. 1.7 trillion will be better managed.

What one gathers from the media reports on Dr. de Silva’s arguments at Monday’s press briefing is that the government doubts the ability of the CB to ensure the safety of the EPF. This, in our book, is a damning indictment of the so-called bank of banks. Had something similar been said about a commercial bank there would have been a run on that institution! If the CB cannot manage the EPF properly how can the government expect it to supervise so many financial institutions?

Will the government say whether the EPF has suffered any losses all these years due to being managed by the CB?

We are told that since the Jan. 08 regime change and the much-publicised radical shake-up at the helm of the CB that institution has regained its vitality and public confidence. But, the government itself seems to lack faith in it!

Both the EPF Department and the Debt Management Department are managed by the CB and, therefore, when governments need to borrow money, the CB makes available funds from the EPF, Dr. de Silva has said. This has given rise to a conflict of interest which enables governments to borrow workers’ savings at low rates while private sector employees want higher returns on their funds, Dr. de Silva has said. Yes, any intelligent person will want the highest possible interest on his or her savings. But, a balance has to be struck between the safety of funds and interest rates; the higher the interest rates, the greater the risk! The nasty experience of those who were lured by unusually high returns on their deposits and invested their hard earned money in Golden Key is a case in point.

Ironically, none of the government worthies talked of any conflict of interest when the lid was blown off a mega bond scandal at the CB early this year. That issue has now been swept under the carpet with the top guns of the previous regime under a cloud choosing to remain silent presumably in keeping with a grand political deal. The exhumation of dead bodies, stories being floated about offshore accounts, probes into financial irregularities under the previous dispensation and the like seem to have had the desired impact on the leaders of the former government.

As for the measures purportedly being adopted to increase returns on the workers’ savings what are the new investments the government has in mind? Will it stop borrowing from the new pension fund to be formed? The impression the government has given the public is that it is not advisable for the workers’ savings to be invested in state debt. If so, the government should not encourage anyone else to do so.

The proponents of the new private sector pension scheme ought to tell the workers what prompted the government to change the structure of the EPF and ETF and whether the new fund to be formed will stop making lump sum payments to workers upon retirement. Will it start paying them paltry sums monthly by way of pensions so that their savings can be made available to a cash-strapped government?

Veteran trade unionists and politicians who have always taken up the cudgels for workers’ rights have looked askance at the proposed amalgamation of the EPF and the ETF to form a pension fund. Former Minister and Communist Party General Secretary D. E. W. Gunasekera, who headed the Committee on Government Enterprises (COPE), has frowned on the proposed merger of the two funds and demanded that the CB which he calls the least corrupt state institution be allowed to manage the EPF. Let their voices be heeded. For, it is only they who really have the workers’ interests at heart.