Will domestic debt restructuring put the EPF at risk?

COLOMBO (News 1st); Experts opine that a great deal of attention needs to be given to pension funds like the Employees' Provident Fund if any action is being taken concerning domestic debt, when implementing the agreements reached with the International Monetary Fund.

They point out that if a large amount of the debt obtained from the EPF is slashed in the process of restructuring domestic debt, it would negatively impact the beneficiaries. 

A week ago, Sri Lanka's President told Parliament that the island nation's total debt was 83.6 billion US dollars, with foreign debt at 41.5 billion US dollars and domestic debt at 42.1 billion US dollars.

On the 12th of April 2022, the Central Bank Governor and the Finance Secretary speaking to reporters said that Sri Lanka will temporarily suspend foreign debt payments to avoid a hard default.

It's been over a year since Sri Lanka decided to suspend  foreign debt payments.

According to the program implemented by Sri Lanka in collaboration with the International Monetary Fund, the ability to repay debt has become a key condition for restabilizing the country's economy.

For that, it is expected that a significant part of the total amount of debt taken by Sri Lanka will be slashed, while a concessionary program will be introduced to for the repayment of another portion of debt,

Foreign Minister Ali Sabry, PC said Sri Lanka hopes to reduce the debt obligation by USD 14 Billion.

The necessary measures that will be taken, with regard to foreign debt, are still in the discussion stage.

In the meantime, the government has now focused its attention towards domestic debt.

According to the Governor of the Central Bank, domestic debt optimization is expected and the necessary measures that are required, are still in discussion level.

The Central Bank explained that the measures that would be taken regarding the amount it has borrowed from treasury bills as optimization.

Although it can be explained in the sense of optimization, the exact steps that would be taken have not yet been explained.

In the meantime, the central bank has announced that there is an opportunity to voluntarily decide and take steps regarding treasury bonds.

According to the data presented to the investors by the Governor of the Central Bank and the Secretary of the Ministry of Finance last March, by the end of 2022, the government had borrowed USD 11.4 billion dollars through treasury bills.

The highest percentage of treasury bills of 62.4% was borrowed by the Central Bank.

The total amount of debt the government borrowed through treasury bonds was 24 billion US dollars.

42.7 percent of it was obtained from pension funds, including the Employee Provident Fund.

According to the report of the Auditor General who investigated the bond transactions, the loss to the Employee Provident Fund from the bond scam at that time was 8.7 billion rupees.

Experts point out that measures should be taken to prevent such a situation from occurring again.

Starting the IMF debate, the President gave an assurance in the parliament and at the United National Party May Day rally on May 1st that he would act in a manner that would not harm the Employees' Provident Fund.

It should be appreciated.

However, when News 1st contacted the EPF Department, it said that the government has not called for any discussion with regard to domestic debt restructuring.

The Employees’ Provident Fund is currently the largest and most widespread Social Security Scheme in Sri Lanka and can be considered as a little ‘Peace of Mind’ for the employees of Private Sector firms, State Sponsored Corporations, Statutory Boards and Private Business. 

The aim of the EPF is to assure financial stability to the employee in the retirement stage of life and to reward the employee for his or her role in the economic growth of the country.

Therefore, isn't it important to make decisions regarding the EPF with a more comprehensive discussion and proper planning?