When Ravi Karunanayake was given the portfolio of finance by the current regime which heralded the promise of good governance following the victory of President Maithripala Sirisena in the 2015 January 08 Presidential election, a senior member of the Marxist JVP pithily compared bestowing the ministry of finance on Karunanayake to a cat being put in charge to protect dry fish. This wisecrack was based on former (largely unproven) charges of corruption against Karunanayake.
Over two and a half years later, the wide-scale allegations of corruption leveled at former President Mahinda Rajapaksa, his kith and kin have taken a backseat with unfolding episodes linking former finance Minister, Ravi Karunanayake, to a Central Bank Bond Scam that has cost the country billions.
The allegations of corruption made against him are now about to cost Karunanayake, currently the Foreign Minister, his job, as pressure mounts on him to resign from his ministerial portfolio in the coming days. A possible resignation from the senior UNPer is seen as the only way of saving at least an element of credibility for the government in the wake of a Motion of No Confidence being submitted in parliament by the Mahinda Rajapaksa-led Joint Opposition against Karunanayake on Thursday. The alternative would be to face the No Confidence Motion, suffer a seemingly inevitable defeat and damn the current SLFP-UNP unity regime to disgrace.
Karunanayake this week faced inquiries for alleged financial links with Arjun Aloysius, a stock broker and son-in-law of former Central Bank Governor, Arjuna Mahendran. Mahendran, appointed by Prime Minister Ranil Wickremesinghe, is charged with a 2015 Central Bank bond scam, which is currently a major black mark against the Sirisena-Wickremesinghe government. The UNP suffers as the first casualty in the Central Bank Bond issue as key economic matters pertaining to the running of the government has so far been handled by Prime Minister Wickremesinghe (something that Sirisena is now taking steps to reverse).
Although in June 2016, the No Confidence Motion brought against Karunanayake by the Joint Opposition, accusing him of misleading parliament about the state of the economy, was defeated comprehensively, the seriousness of the allegations against Karunanayake this time around makes him an isolated man. Members of both the UNP and SLFP have indicated to President Sirisena and Prime Minister Wickremesinghe that unless Karunanayake resigns, they would vote against him when the No Trust Motion is taken up in parliament.
Opposition MP Wimal Weerawansa this week declared that he was ‘appalled’ by the answers Karunanayake had given to the Presidential Commission investigating the bond scam Wednesday. According to the statements made by the Foreign Minister to the investigating commission, he was not aware that his wife leased, and then bought, a luxury penthouse for LKR 165 million with money advanced by Arjun Aloysius of the stock brokering firm Perpetual Treasuries. The allegation is that Arjun Aloysius, a leader stock broker running the firm Perpetual Treasuries purchased Central Bank bonds with inside knowledge gained, owing to his father-in-law, Arjuna Mahendran, being the then Governor of the Central Bank.
In February 2015, the Central Bank advertised the sale of LKR 1 billion in 30-year government bonds at 12.5%. The sale was oversubscribed with 36 bids totaling LKR. 20 billion. The majority of bidders (26), bid for LKR 100 million or less at a rate of 9.5% to 10.5%. However, a few bidders, including Perpetual Treasuries of Arjun Aloysius, wanted interest rates of 11% to 12%.
On 27 February 2015, the Central Bank accepted LKR 10 billion in bids at rates of 9.5% to 12.5%. Perpetual Treasuries was issued, directly and indirectly, Rs. 5 billion in bonds at 12.5%.
The issuing of ten times the advertised bonds, and at a higher than the expected rate of 9.5%, allegedly cost the government an additional LKR 1.6 billion (U$ 10.6 million). Proper investigations on the issue emerged only after President Sirisena appointed a Presidential Commission in January 2017.
Karunanayake in his statements before the commission had stated that the deal on the penthouse was struck by his wife Mela through Global Transport and Logistics, the company he had founded. However, he had resigned from the chairmanship of that company after he became Finance Minister in January 2015. Therefore, he knew nothing about the transaction in regard to the house although he was living in it, he claimed.
Karunanayake had also denied that Aloysius and he had gone to Singapore 13 times at the same time, but admitted that he had met Aloysius a couple of times in Singapore. When asked by Presidential Commissioner Prasanna Jayawardene whether it was right to lease the apartment through a Perpetual Group company involved in the bond scam when, as Finance Minister, he was connected to bonds and capital markets Karunanayake had agreed that it would not be a correct thing to do. However, Karunanayake had stuck to his claim that he was in the dark about the transaction.
His purported ignorance has spurred outrage in both the UNP, the SLFP and the general public although some sections see him as being a sacrificial lamb to salvage the dismal performance of the current regime in the economic front and in particular its inability to crack down on corruption within their own camps immediately after allegations surfaced. Investigations and action against Arjuna Mahendran was prolonged until he was relieved from governorship of the Central bank mid 2016 when his contract ended.
SLFP members in the Coalition Government have urged President Sirisena to call for the resignation of Karunanayake, insisting that if this does not happen, all SLFP members will vote against the Foreign Minister when the No Confidence Motion is brought up in parliament. The UNP members have also informed Prime Minister Wickremesighe that despite the party affiliation, they too will be compelled to vote against Karunanayake.
Meanwhile, desperate to be seen as taking action against a fast deteriorating scheme of things in the government he heads, President Maithripala Sirisena submitted a Cabinet Paper last week seeking approval to appoint a new National Economic Council (NEC) under his purview in order to take key decisions on economic and development projects of the Government. This would mean that key policy decisions would be made by the President and not the Prime Minister as had been the case since the national unity government took over in 2015. Reportedly, the National Economic Council (NEC) will sit above the Cabinet Committee on Economic Management (CCEM) which is chaired by Prime Minister Ranil Wickremesinghe.
The current concern of President Sirisena on the unraveling of intrigues, the string of trade union strikes against planned development projects with foreign entities, and the overall poor management within his government come amidst the ever-watchful clan of former President Mahinda Rajapaksa waiting for a possible take-over of the SLFP and the country. Rajapaksa is eyeing the long overdue local government and provincial council elections as a route to de-stabilise the current regime at least psychologically, if not structurally. With nearly three more years for the next Presidential election, President Sirisena is keen on being seen as taking charge and cleaning up the mess. The SLFP which is under his leadership (although sections are with Rajapaksa) expect Sirisena to be tough on Karunanayake and save face. A lenient stance from either Sirisena or Wickremesinghe now would mean that their respective parties suffer the brunt of disapproval by the masses.