charindra chandrasena 00:05 Daranath and Riyadh, welcome back. Speaker 1 00:08 Hi, hi. charindra chandrasena 00:09 I'll say welcome back to you first because you you are coming back from a shorter distance. Speaker 1 00:16 Yes, charindra chandrasena 00:16 and then I'll say welcome back to and Speaker 1 00:19 at sea level. At sea level, yes. charindra chandrasena 00:21 And then I say welcome back to Daranat because he's he's coming from like he was very high. When I say you very high, I was literally very high. You had to Dhananath Fernando 00:32 specify. Yes, these days I charindra chandrasena 00:33 had to be very specific, especially with the news that we've been getting over the last couple of days. But you are high, very high in the sense that you had a very high altitude. Altitude, yeah. You you got one step closer to your Everest dream, right? Of of conquering Everest, and I think I think again it's it's a testament to people who don't know you have just returned from base camp and even further than base camp, right? Dhananath Fernando 01:03 That's correct. charindra chandrasena 01:04 Yeah. So the adventurer in Dana comes out once a year. So good to have you back. Dhananath Fernando 01:13 Thank you, thank you. A lot of a lot has happened. A lot has happened. Yes. You charindra chandrasena 01:17 you you have been away and a lot has happened. Speaker 2 01:20 Yes. charindra chandrasena 01:20 So we we are not going to cover or try to cover all of that, but we are going to focus on the main issue as far as the financial sector and the economy are concerned. This 2.5 billion sorry $2.5 Million dollar debt payment that was supposed to go to Australia, but has apparently gone somewhere else. Nobody knows where. Now there are different versions that have been put out from the authorities' side and then from the opposition side, from the government side, they first said that it's a hacking attack, and that the money is missing, and they also maintain that they are going to get the money back. From the opposition side, they're saying that this is not a hacking attack. That at best this is a phishing Dhananath Fernando 02:26 attack. charindra chandrasena 02:27 At worst, it is planned corruption or a planned theft or a redirection of that of those funds. Now we are not going to be the investigators here, but as things stand, how damaging is this in terms of? I'll get the macro view from you, Dana. How damaging is this in terms of our financial management, the national financial management, and also in terms of the confidence that people have in that process. Dhananath Fernando 03:05 So, Chari, my view is it's mainly the credibility damage because if you look at, I mean, this is not to underestimate the 2.5 million dollars, but compared to the debt repayments, this 2.5 million dollars is not such a large, large amount. It is a big amount. I mean, it's closer to about 800 million. Yeah, but in the grand scheme of things, in the grand scheme of picture, it is not a service like about 5 billion versus 2.5 million. It's, but it is not an excuse to have that. the The real challenge or the the macro wise impact would be the credibility, whether the treasury, the the level of confidence people have, and that may have a you know this ultimate perceptions becomes reality when people lose trust on whether our money is safe or like whether the treasury can I mean secure our money, especially taxpayer money, then it dilutes the credibility, and also again, as I said, since the percept reality perceptions become reality, central bank is also in trouble. I think there's still we have to check like when this has happened and whether this is during the transition period from the central bank to the treasury with the public debt management office. But again, I saw a lot of so many Facebook posts also asking, okay, they advise us to get away with scams, and now we are got into a scam. So those credibility. Yeah, also since you charindra chandrasena 04:29 mentioned that for our audience, can you explain the reason that it was separated from the central bank? Yeah. Dhananath Fernando 04:37 So basically, what happened was as a part of large scale of reforms we did after the economic crisis earlier, the debt servicing, all the debt payments were done under the central bank. So they had the they had the accounts. So they are the ones who were basically monitoring the due dates and payments. So generally, this must have happened. On a proper system, it is not like someone looking at every day like a book and say when is the next due date. It has to have a scheduled automated payment system. And then what happened was there is a new act which is the setting up of public debt management office because otherwise the central bank can have a the reason was you you make the central bank independent on one side, where their main target is inflation. The debt servicing is taken back to the treasury, but under treasury there is a separate office called public debt management office. The reason was why it was taken away from the central bank. There can be a conflict of interest, and it's not the role of the central bank because when the debt amounts are going up, central bank can adjust interest rates, exchange rates. So with that, you basically you know have a conflict. So as a result, you have a separate office to manage public debt. Manage a very specialised job. So you have to have CFA guys to because if you can actually save quarter of a percentage of a large debt stock by managing it because you are rolling it over, so you issue debt, and then you are settling it. So if you can actually roll it over properly, you can get a massive billions of savings. But if you have, you have to have the capable people. So that's the reason why it was taken away. So I think the act was in 2024, but there was a transitionary period. I think the transition basically happened, as far as I know, January, December, January that period of last year, last year and this year. So whether this has happened during that interim period, we have to wait for the investigations. That's the reason why it was separated, which is a very important reform, and that's one of the major reforms actually we did. Central bank independence, Central Bank Independence, Public Debt Management Office, Full Price Formula, Anti-Corruption Act. So those are the those are the key reforms, and the Public Finance Management Act. So this is part of that key reform. So we should not go back to thinking like whether it should move back to the Central Bank. charindra chandrasena 06:59 So basically, it is not a fault of that system in the sense it's not a fault of the new system. Yeah, it is that something has slipped through the cracks. Correct. In that interim transition. Transition fee. Yeah, Dhananath Fernando 07:14 we don't know whether it's a yeah, but whether it's actually happened during that interim period. But it seems there has to be some level of we. I also can't. From what we are hearing, charindra chandrasena 07:24 it is that exactly right. It is the transition period. In which case, I mean, it begs the question why safeguards were not in place during the transition period. Because one could argue that the transition period is the riskiest one. Dhananath Fernando 07:38 Correct. charindra chandrasena 07:39 Right. Because it's changing hands, and therefore the need for safeguards is highest at that stage. From Dhananath Fernando 07:46 the COPEF meeting, what I heard was from the central bank offices. Even the IMF has recommended transition period. The central bank has to handhold the process for about a year. So that's what they have agreed, and that's what the central bank. I think additional directors also mentioning to the COPE. Yeah, Speaker 1 08:01 and that what happens is normally when you do a transition like that, you have second months. Now normally you have second months from the treasury to the central bank, and plus you have vice versa. You have secondments for secondments from the central central bank to the treasury. So normally when you are doing a transition period, then those second months secondments come because one thing is you need the procedural thing. No, so just right. So so because of that, normally during the transition, both of the departments actually work together, and vice versa. The what you call the second months are there. Now the question, this thing is that obviously there has been a huge procedural issue here, right? Now if you take let's say as the but one thing is I just want to clear up. I I think I remember hearing someone saying that the digital economy minister or someone in another minister said that this is a phishing attack and not a cyber attack like what the treasury secretary has said. So yeah, yeah, charindra chandrasena 08:54 that's what I was saying. So the initial narrative was was hacking. Yeah, and then when the decision started pointing out that exactly because of Speaker 1 09:03 phishing attacks. Yes, charindra chandrasena 09:04 right. So because I mean it can't be hacking because if if it was sent voluntarily by that organisation to another organisation, it can't be hacking. Hacking has to be Speaker 1 09:15 exactly charindra chandrasena 09:16 during the process. Somebody yeah you know interferes compromises the process Speaker 1 09:20 correct. And the thing is it can't be hacking because normally you have something called payments and settlement. Payment and settlement is not done by the treasury because it's done by a via a bank. Treasury is not a bank, right? So the treasury's banks are the two state banks, BOC and People's Bank, and they will give instruction to the state banks to make the payment, right? So that's how it happens. So then that means it's not the treasury that gets hacked; it has to be the bank that gets hacked. I don't know. I'm just trying to figure that whole thing out. And but yeah, yeah. No, no. The other Dhananath Fernando 09:52 thing is generally now for any payment, like even when you work in any organisation, there has to be a registry of like basically of. Payments, especially on a system, and that's why it's like even a payroll, like your employees, absolutely account details. You can't just change the salary to this bank account to another bank account every other month. If there's a if there's a change, it's a fixed account. Most of the companies like they work with one particular bank, so most most of the time they say like you open a bank account in that particular bank in certain cases, but so there has to be one set of documents on on I mean in terms of payment procedure. Generally, there has to be a registry and a system where only the payments can go to those accounts. So payments are, and so that's number one. Number two is even if the payments are there when the payment process, generally there are supporting documents. Even on a basic payment, you have a have a payment voucher. You have to have invoice. You have to have a proof of like you know the work is done, supply. So in this case also, there has to be some level of I mean some document that this is the interest payment has to be some supporting document to approve. Yeah, and also the account, or like on the other side, there has to be some level of documentation saying this paper is due on this day, and this is the accounting. So I'm not sure like what happened in no, but that's that's charindra chandrasena 11:10 that's the point. Dana, let's okay. So two possibilities. One is that this was erroneously transferred due to a misunderstanding or a Speaker 1 11:23 that means like like a massive breach in procedure yeah massive breach charindra chandrasena 11:27 right other more sinister interpretation would be corruption that they colluded yeah and then got the money out so it's going to benefit somebody who was an insider yeah okay now let's give the government the benefit of the doubt. Okay, and let's say it's not corruption because innocent until proven guilty. Let's. But the fact of the matter is, it has happened. Dhananath Fernando 11:52 Yeah. charindra chandrasena 11:53 Now, if we rule out the corruption, it is incompetence, as far as I'm concerned. Yeah. How much of a competency gap does this hint at? Speaker 1 12:05 So, if you look at the competency on that, it's a very difficult one to say because generally no. But if you look now, normally there is a charindra chandrasena 12:14 at the at the administrative level. Yeah. So no, feel like Sri Lanka. It can be Speaker 1 12:18 can be can be. So the thing is, normally if you look at most of the government servants, what's recommended is to get people from slas because slas they know the procedure how the government works how payments are done how appointments are done and so so on and so forth. Now there has been a scenario now, okay, things like ministers and all that you know it's a different story. But if you look at public officials now, for example, the current treasury secretary was was not a government employee. He is not from SLAS. So sometimes through inexperience, sometimes they don't know what are even if there is a breach, they won't know about it. That's why they always say because what happened in Sri Lanka was one of the biggest problems was where if you go back couple of decades, where the political interference in public service, where the permanent secretaries used to be permanent secretaries and all that. The whole last structure was breached, right? So when you keep on doing it, at some point you get a person who doesn't know how the there's a particular term they use, singular term they use. I can't remember it now because I spoke to someone who was from public service. They said there is a golden system in public administration that goes right. So, if you get a person from outside, they don't know how it happens. So that might be an issue. The other one is again this transition thing. But then again, just to picking out what Dana said, if you get into let's say Chari, you are taken a loan, we don't have to make this thing very, you know, we don't have to make this thing very complicated. Let's say you have taken a loan, right? Normally, you have a loan agreement. So, loan agreement states what the loan is, what the rate is, right? When you have to pay it back, or the what you call the the the monthly payments. And normally, what happens is you do the monthly payments on a personal loan. You do it three days after the salary because then the salary comes. Then you do a standing order to a particular account, so that's how normal system runs, and I don't think any government procedure when it comes to paying back would be greatly different to this. So if there's an agreement, I'm obviously you get a contract, right? So if you're changing the account, right, you have to make a addendum on the contract, or you have to annul the contract and bring a new contract, right? So how did that change? That is number one. So, and the other one is the payment. The pay master is the payment is done through a bank. So that agreement is with the bank also, where the bank verifies. Now, for example, let's say the phishing has gone, and they have even got to the point of sending a bank bogus mail saying the account number has been changed, which the bank has accepted because it's coming from the treasury. Still, normally banks, you know, right? Because banks are by nature they are very careful, right? Especially on payments and settlements, they would call back, especially it's a big payment, 800 million rupees. 800 million rupees, right? They would call back and verify we got this mail because they also know no these phishing attacks and all that bank guys who work at banks. They know these these things happen. They would call and verify. I'll give you a small example, right? Sometimes if you give a 1 million check to someone, they might actually call and check. You know, this guy has come with a 1 million check. Shall I cash it or that's why you know some have you notice? I'm just talking with you. Like where they take the check and say, "Can you hold on for a minute? And they go back. That is make that call charindra chandrasena 15:31 at the bank. Speaker 1 15:31 At the bank. So the thing is, if it happens at that level, this level also, they they would have some person where they would call. So that is the question mark I am having, even if it's phishing, how did it go to this? So if it has gone to that extent, that means like complete utter disaster. That means the whole system has to be overhauled. Dhananath Fernando 15:50 So, Charlie, my view is on the incompetence is that okay. Let's say a normal administrative officer got this email, and I don't know if if they have changed the account details as per this whatever that email that phishing email that has come and changed it's like a mistake. I think the incompetence comes. Ideally, the person at the top should realise there has to be that means the absence of a system and the the person on the top has to, they are recruited or they are job based. So think about those payment systems and all that to avoid these things. So I would say that because someone can, it's easily easy to blame officer who like okay you got the email you call the same person and verify the same person or you know send the phishing email. But rather than that, that absence of a system that means there has to be a massive system loophole that these payments are not done through a automated system. So that's where other incompetence comes, and that's why we recommend that cherry, especially when you are moving to this public debt management office, and especially regardless of the public debt management office, this very senior public officials has to be paid well because someone who is handling a 2.5 million dollar transaction cannot. I mean, someone who is earning 100,000 rupees cannot not may not be in the capacity to manage 2.5 million worth value of transaction. So you have to have a very senior, knowledgeable person, knowledgeable not only on finance but these overall aspects of it, who think about the payment systems, the authenticity, the payment security, the gateways, and all that, and even who are who can think of how to cut corners and basically bring benefit to the country. So charindra chandrasena 17:39 what you're saying is that Sri Lanka doesn't lack the talent and the skills and the knowledge, but those people are not being attracted to the to these relevant authorities. Dhananath Fernando 17:53 Absolutely, charindra chandrasena 17:54 due to the pay gap. Dhananath Fernando 17:55 And this was quite evident because I think on the COPEF meeting in July last year, there was a discrepancy. For an example, this is a classic example. Debt management office says the debt to GDP ratio is 72% They are going to bring it down to 72% in 2038 2032. But there's no way it can be 2032 coming to 72% because basically the IMF agreement and everything projects it to be 98% approximate at the same time. So then, then it was question. There are a lot of assumptions being taken wrong. Which is charindra chandrasena 18:31 saying 72% Dhananath Fernando 18:32 The public debt management office that during the transition charindra chandrasena 18:36 period. Dhananath Fernando 18:37 So they say no. We have taken our exchange rate was 292, while the IMF projection was 300 to 400, and the GDP. So, like basic things like that has lot of you know discrepancies. So that I would I won't rather looking at like okay some officer made a stupid mistake that he got caught to this phishing email rather than at the top senior level, that means we haven't thought about the payment structures, systems, how this is being done. And to do that, you have to have capable people. That for you have to now for a CFA, if you are going to recruit a CFA person, chartered financial analyst. I mean, their salary scales are quite high. You need about two three people to run this public debt management office. Who really manage these billions? Because you are talking about a $30 billion, $40 billion sort of a portfolio. Actually, it's about 100 billion dollars when it comes to all public debt, right? Managing that, so it's a lot of money. So issuing that and looking at interest rates, all that has to have capable people. So I would look at the incompetence at that grand scale of things at the same time. And Speaker 1 19:46 the other thing is, like sometimes it's difficult because you know you have a government pay structure and all that. You can't get people from outside. What you can do is you can bring consultants for let's say for particular projects. I mean they are they are not full-time employees. I mean things like this happen. That is one. Other thing is, which I don't think a lot of people know, is that through one of my through some connections in the banking industry, they said there has been a lot of phishing attacks actually to banks. It has been happening before this also. Before this also, like there has been in the last, I think I'm not exactly sure. Like maybe last two to three weeks, there has been maybe about two weeks, there have been quite a bit of phishing attacks. I think close to about 13 banks. They were trying. Some guys were trying to get through, and I think some banks actually got hit, and then they started fighting back. So this problem may happen. In fact, charindra chandrasena 20:33 in fact, I think somebody in the government actually said that there was an attempt made during a payment to India as well, and then only this Australian one happen. Speaker 1 20:45 Yeah, exactly. So, so, so then you have to be more exactly. You know, you know, all the more reason charindra chandrasena 20:50 to be extra cautious. Exactly. Speaker 1 20:52 So, so if caution is throw thrown to the wind, then this kind of problems can happen. So that is that is something they really need to look look into. Yeah, charindra chandrasena 21:02 I I want to also pick up Dana. If you want to add something on this part, but basically, you mentioned this also, Riyadh, about the appointment of the Treasury Secretary. Now, he is not from the administrative service. He was in Parliament, then he left Parliament, and then he joined here, following Dhananath Fernando 21:27 mr. Radhana. charindra chandrasena 21:29 So, why why shouldn't the Treasury Secretary position? Why does it disqualify you? If you are a politician or a former politician. Why does that disqualify you? Speaker 1 21:44 Okay, that's a very difficult question. The thing is, see the lifeblood. Because it's not charindra chandrasena 21:49 legally disqualified. Speaker 1 21:50 No, it's not legal disqualifying. But charindra chandrasena 21:51 why should it disqualify you according to you? Speaker 1 21:53 No, the thing is, it's a it's a administrative role. So for administrative role, you can't put. This is my personal opinion, by the way, right. So the thing is, you can't put people with who come with who come with political baggage there because it's a very straightforward administrative role, and it's the key ministry. Because if you check any government or any this thing anywhere, the powerful secretary, technically in Sri Lanka, the powerful secretary should be the presidential secretary. But in real life, the powerful secretary, the guy who has who has all the pulling power, is the treasury secretary, and it has been proven over and over again by, for example, when P.J. P. B. Jaya Sundar was the treasury secretary, and the amount of clout that he had. So that means that role Speaker 3 22:35 has Speaker 1 22:35 has inbuilt power, right? So when you have so much of that, like what they say in, I'm gonna put, I'm gonna bring an analogy from, let's say, from is it Marvel or DC, Spider Man, you know, with great, with more power, great responsibility, right? So I think that's the best way to describe it. So with all that, so the problem is then you're if you're putting a person who doesn't know how the structure works, right? Then there are a lot of gaps that open up, and those gaps people can creep in, and you know they can do their own bidding. charindra chandrasena 23:08 So that is where I see the problem. How responsible is the president as the finance minister? Speaker 1 23:18 Yeah, so he's end of the day, end of the day, he's a finance minister, and the normal this thing what people say is, you know, we don't have a proper man to. I think even you were talking about it. We don't have a proper man in in the government rank. Yeah, so he comes from off camera. I think charindra chandrasena 23:34 we we were talking about this, and and the only sympathy I have with this government on that front, is who else were they going to appoint? Speaker 1 23:46 So, so Charlie, so listen. So the thing is, the Sri Lankan Parliament, there are 225. I think there are how many nationalists? 25, is it? Dhananath Fernando 23:54 But 29 now. Yeah, you're right. Speaker 1 23:56 29 nationalists, right? So if you have 29 nationalists and if you have two thirds majority in government, this is like one of the largest majority-winning governments that that in the history of Sri Lanka, right? Which I think the only one that surpasses this is Jar Jayamadana's cabinet, right? So, if you have that, I mean, the national list is there to put up professional or someone who can't, who doesn't want to go through the whole political structure, or to get a person from outside who has the who has that specialist knowledge for that particular task, right? So it's right. So now the problem is having the nationalist and not getting a person who can run it. Then there is a there is a question, and this is not something. This is limited to this government, previous governments also have done this, right? Where the president has held the portfolio and put a person who doesn't have. I mean, we had we had we had a professor of law who was the equity finance minister. I mean, GLPS was there, but GLPS is a you know he may he may. Have a PhD. He might be a professor, but he's a professor of law, right? So, like that, what I'm saying is, you know, like that. What I'm saying is, you need if you have the nationalists, use it, right? Like in rugby, what they say is, you know, the referee's first call when rolling mall is going on. First, he says, is use it. Speaker 4 25:19 Yes, it is. Yeah. Speaker 1 25:20 Then they say use it again. The third one is either use it or lose it. charindra chandrasena 25:22 Yeah, lose it. Speaker 1 25:23 Right. So the thing is, you know, I'm just bringing the analogy. The thing is, you. So that's what has happened. Is use the national list, get the right person to come, which they didn't do, right? Then you lose Speaker 2 25:33 it, Speaker 1 25:33 right? So the thing is that that is some area that you need to go because don't forget, if you look at the government structure, the person that after the president who generally has the most power in real life. I'm not talking about the political power. It's not the prime minister. It's the finance minister. That's why everyone is scared to give the finance minister up because he very finance minister is all powerful minister. charindra chandrasena 25:54 Of course, of course. Right. Speaker 1 25:55 So, so the thing is, get a right person. I mean, get a person who. I mean, there are people who will be perfect for it. But the problem is they don't go through the full harangue of politics. There are people who don't want to come there, right? Thinking, you know. But then again, you can use it to basically bring a person outside for that international list. The charindra chandrasena 26:15 only counter I would put to that in this specific example, Riyadh, is that before this government came into power, there was a lot of uncertainty, lot of questions being asked. Are you going to pull out of the IMF agreement? Are you going to reverse all the reforms? Is this going to be a socialist country and communism even? So the the only reason people voted was keeping confidence, keeping their trust in the president. I think that is one of the reasons that it was entrusted to the president. No, no, no, correct. Speaker 1 26:52 No, no, no, correct. But, but, but let's see. Through the crisis and all that, I think the last couple of decades or two decades, I think the best finance minister we had, he was already there for a very short time. Unfortunately, was Manglasamarir Now Mangal Samaravere is not a you know he's a fashion designer, right? Then he came to the ranks of politics, right? But the thing is, Mangal Samarayira at the treasury he had the right team. Fair fact, right? The treasury secretary was a slash Dhananath Fernando 27:15 guy. Then Speaker 1 27:16 he had the the consultants. I mean, I don't go into names. I mean, we know how they charindra chandrasena 27:20 are. So I totally get your point. Yeah, this is not a disagreement, but I'm saying that in this specific example, you can sympathise a little bit with the president for taking the route that he did. So, in terms of now we are talking about a digital economy, you can come in as well. We are on this. That is one of the flagship projects of this government. How much of that confidence is going to be eroded because of this? Dhananath Fernando 27:49 Absolutely, that's second. I mean, charindra chandrasena 27:51 the government surely can't talk about a digital economy and digitising everything and cashless society and all of that, and then get electronic transactions wrong. Yeah. Dhananath Fernando 28:01 So that's where the other worries, like the credibility losing or the credibility of the central bank and treasury. And the third one is this digital economy, because this will create a lot of questions, and also this will reiterate the need for like proper data security laws on the other other front. Absolutely. When we are moving forward, so that's my other worry, third one. But coming back to your point, Chary, on the president as the finance minister, I would like to go back to the first principles thinking. So generally, why don't why we do not recommend the president to have the Ministry of Finance portfolio is because Minister of Finance is like a CFO, which is a very unpopular job. You have to increase revenue, cut down expenditure. No one is going to be happy with that, especially when you are running for, especially as a president, you have to have a popular mandate on the other side. Like at the last point, you need to, you should have that lever that you can intervene and do whatever the thing that you want. But if you are trying to do it as the minister of finance, it's going to be disaster. So that's the first principles thinking. But unfortunately, we didn't follow it for a long time. I mean, if you look at many presidents have been the minister of finance, unless Mangala was even Basil Rajapaksa was also at one point the minister of finance, and then still again it went back to the president, and now you can see that pressure, because now since this happened, now it has come to the top level of the government, and that brings the political instability as well. Now you can see already the pressure is mounting up, and if there's one person who had the credibility and people's trust, it was president, and now his job has been kind of in the defence line, and now it turns seems to be turning out to the political pressure at the same time, so it gives the indication why we shouldn't have done it. And also, it's important that we understand the protocols because if you recall the Easter attack, the main I'm not saying it's the main reason, but there was a 52, there was an unconstitutional sort of two prime ministers in the same seat. And that completely dismantled the defence apparatus, and then afterwards, Prime Minister Hassan being called for the Security Council meeting. It is not the main reason for that, but we are we can see that the missing of the protocol has a implication on this. So same way, when you are appointing people, when you do not follow, regardless of all the flaws of the bureaucrats, generally you keep a reliable person from the secret ministry of finance because ultimately they know the system. Of course, they are not perfect. There's lot to be improved, but when you try to bring and then there's a friction between the system. Ultimately, you have to work with the existing system. That's the difficulty of politics. At the same time, because you have a same team, and you have to create a magic out of the same team to really take the economy out. You cannot really reshuffle the vote. You can't. You don't get a clean sheet. You basically work on all the backend working someone had done, and you build upon that. So you have to do it with the. That's why the public policy is difficult. The other issue is, this is the crucial one. Even I think this mistake can happen, but if they haven't informed, if they knew it, and if why they fail to inform the parliament, because when it comes to public finances, there's if it's a cent, it has to be approved by the public. So their charindra chandrasena 31:24 defence, Dana, is that they were pursuing the culprits, and they didn't want to tip off the culprits by going public with it. The the counter argument to that could be. It could have been a closed door meeting at COPEF, the Committee of Public Finance. But in Sri Lanka, how close do are closed door meetings? Speaker 1 31:49 Absolutely. charindra chandrasena 31:50 So if it had gone to COPEF, the opposition MPs could have easily leaked it, as has happened so many times. Dhananath Fernando 31:57 Yeah. charindra chandrasena 31:58 So don't you don't you agree with that? No, Dhananath Fernando 32:03 I see. But now, see what has happened. Now the same thing has happened. charindra chandrasena 32:08 Now it has leaked. Now it has leaked Dhananath Fernando 32:10 anyway, right? Now it has leaked anyway, and depending on the day that they have lodged the complaint for CID or wherever, now you are in a deeper trouble. Even informing, knowing that this they will leak it out, it could have been a safe option, because at least you had the responsibility in good faith to inform that something has happened, that public money has had an impact. So we are informing, that gives the indication, but I understand the political repercussions. But now things have got worse because now anyway the everyone got to know about it, and it was a government didn't say, and then it was like you know outsiders and media, social media brought it out, and now it questions the whether you had an intention to hide sort of a thing has come up, which is not good for the government. So that's why I think it's important that we follow the protocol, and at the same time, the COPEF meeting. I think some other treasury officials have been summoned. They have underpreared, so it's important. While we like the person who seated on the table, whether we like it or not, there's a protocol. We know no one likes auditors, right? But there's auditing process going on to see in any company what's going on? I mean, you pay for them for pointing out the issues. So, so likewise, you have these checks and balances for a reason. So, those are the critical things I think where things become a little complicated. Speaker 3 33:36 Yeah, yeah. In charindra chandrasena 33:37 terms of in terms of confidence, now IMF Chief Kristina Georgeeva herself said Sri Lanka finally has a government that has the confidence of the public, and therefore the public is willing, more willing, to take the the the bitter medicine because they know that the government is doing it for the best reasons and with their best interests at heart. How much of that is going to be eroded through this? Because this is also coming, Dana. Remember, as a volley of crisis. Dhananath Fernando 34:19 Yeah, charindra chandrasena 34:20 you know you take the the even the NDB show. There is a little bit of a government. You know, they can't completely wash their hands of it. Government or central bank, right? And then before that, you had the coal issue. So there are like couple of things. How much of that is being loaded right now? My Dhananath Fernando 34:38 understanding is, Chari this public confidence or trust, it won't be it won't be tarnished on a single event. Like it all adds up over a period of time, and the value of that or the gravity is increasing and multiplying over a period of time. Like for example, when the central bank bond scam when it was indicated, no one really trusted, but when you. Move on, move on, move on. The the weightage that you give for that incident over a period of time. Okay, this happened, that happened, and so many other corruption cases happen. Then the value that you give or the weightage that you give is going to go up over a period of time, and also how you react and respond to it. So I think it's up to the government to show how they can bring back. I mean, what are they going to do? Like, if I mean, they come and apologise and say the truth, and then make some calls. Like, but but charindra chandrasena 35:33 also from an economic point of view, and yeah, you can come in as well. From an economic point of view, how harmful is that that erosion, potential erosion. Does it lead to greater tax evasion? Does it lead to higher levels of corruption? How does that manifest? Dhananath Fernando 35:52 I think there'll be an issue. I mean, people will have a bit of a concern about the tax payments and all that because if they feel, but I don't see like it will dropping down like you know a few few percentage points to like you know, but it's the political instability and the erosion of the trust of the two the system, and the the credibility issue and the digitization is my main concern. charindra chandrasena 36:17 Yeah, Dhananath Fernando 36:17 so I think the the government should I mean, respond, and also the way that they respond. Yeah, I think they are not giving a debate. I think their PR charindra chandrasena 36:27 needs a lot of work. Yeah, their communications need a lot of Speaker 1 36:29 work. Yeah, and the other thing is like just taking q1. What Jana said is basically you have to be, you have to think, rethink the whole digital platform, because just imagine if everything goes into a database which has everything from your birth certificate to your bank details, everything. If someone breaches that, they can basically there's going to be identity theft. There's going to be a lot of repercussions that's going to happen, right? And there'll be a lot of massive issues also, especially when it comes to finances, like if they breach and the government has a complete record on, let's say your your personal finances, like then they will know what kind of assets you have. They'll know how much of money you have and all that. They'll they can determine if this person is a rich person or not a rich person or poor person, right? Then that on the criminal element that brings whole another set of problems that's going to come, so because of that you have to be very careful that these breaches don't happen. Because if those those breaches happen, and because if those breaches happen in the future, and something like this happens where you know fishing or whatever that someone breaks into the system, then the public confidence is just going to nosedive. It's not going to dive. It's going to nosedive, right? And that's going to bring a lot of political turmoil, right? So that is something that we have to be very careful of because one thing that happens in Sri Lanka every time when we go into a recovery, something goes wrong somewhere, and then we fall back again. We try to claw our way out. Something happens either domestically or internationally, I mean, I mean it has happened. If you check the track record in the last 10 years or maybe 15 years, every two years something really bad happens. So this might be the next one. So the government has to ensure this doesn't become the next one. Correct. Speaker 1 38:18 Right? Because we have to go digital. There's no question about it, but how it has to go with the safety protocols and all that. You have to make sure that the citizens are protected, right? So those things definitely has to happen. And if they just go again by throwing again caution to the wind, then I think that's something really that's something that really the government needs to look into charindra chandrasena 38:40 yeah, and Dhananath Fernando 38:42 the other point is also now whether this falls under a I mean technical yeah I was charindra chandrasena 38:47 that's that was my question yeah yeah Dhananath Fernando 38:49 so because some charindra chandrasena 38:51 people have have asked inquired some have commented even that okay now it's yeah this falls under Dhananath Fernando 38:57 I think a technical default but I'm not sure I'm also trying to I could not no I think Speaker 1 39:01 no. So I think the technical default it depends on the person you are paying. No, so the issue is, I mean, it's not a big amount. So normally, if you take a default, is knowing you can't pay. So this is you have paid, but you have paid someone else. So it's a technically, it's actually a fraud case, to be honest. So in an instant like that, what happens is, it's not a very serious issue where it's not going to hit our rating and all that. I mean, the problem is the rating, no? Dhananath Fernando 39:24 Yeah. Speaker 1 39:25 So if you hit the rating, so this is I don't. I mean, to be honest, I'm like I'm almost like 100% sure that it's not going to hit the rating. But charindra chandrasena 39:30 it does count as a technical default. Speaker 1 39:31 No, it counts as a technical default. But this is something that you know people are not going to take too seriously because a default is where you are you don't want to pay or you're unable to pay, unable to pay, right? So this is not being that you didn't want to pay, or you were unable to pay. This is something where you paid, but you paid the wrong guy. So this what the normal scenario is: you go back and then you make the payment to the right person, whether treasury or the government or in in in treasury or. Government takes a two and a half million dollar hit. Yeah, yeah. But Dhananath Fernando 40:03 how it happens is, Chari. Generally, as I said, perception is the challenge. So basically, when you have a, when you have a even in a business, when you have an unreliable paymaster, you basically cost for it. No, correct. So that is where we have to be a little cautious. Yeah, it may not be a big, big issue, but ultimately it gives the indication. Okay, these guys are not the very well organised sort of guys to really pay. So you have to be cautious of the sentiment. So that's why I think it's there's lot lot of work now on the crisis management fund the treasury has to do on ironing it out and informing the creditors and informing other creditors, all that, and I think it's charindra chandrasena 40:43 important that they don't think that this will just like they can't wish this away. No, no, so that's it. That this will just you know fade away. No, no, that's Speaker 1 40:52 the same thing. Now, if you take because normally we do a payment, there's a huge approval process. No, I mean you take a company, you get an invoice, right? So that invoice you need to go to the accounts department. You have to sign it off saying yes, this invoice is correct. Then the accountant has to check everything and say if that job has been done. Then you then it goes to an X extent to the to the next level. So there's a procedure. So if you take again a funny, if you take for example Jatilo Tarai, so when that ball thing happens, you have seen so many people who sign it. No, yeah. After this thing, because it's verification, they do that because it's legally binding. So the legal system that multiple verifications have to happen. That's why so many people. There's I think one person from the from the from the central bank or something. Then there is a. I've always seen a police officer being there, yes, right. So, so there is a whole long table. Whole table where people sign it off because the reason is that is the procedure. Yeah. So that no mistakes will happen, and if a mistake happens, charindra chandrasena 41:53 from what I've heard, yeah, that process was activated here as well. It's just that everybody has approved. Speaker 1 41:59 No, that's what I'm saying. So how can it go to multiple? I mean, that's the thing. That's the question I'm having. You know, so like depends Dhananath Fernando 42:05 on the investigation. Yeah, we don't know either. So let's. Speaker 1 42:08 Either way, it looks bad on the government. Either you know. So there will be two possibilities. charindra chandrasena 42:12 At at best, it's incompetence. Yeah. At worst, it's corruption. Corruption. Yeah. So so let's let's not give corruption right now, but let's focus on at least it's that. Yeah, so Speaker 1 42:22 at least the CID is on the job. So let's see. Yeah, let's see how charindra chandrasena 42:25 how that goes. We're out of time unless you guys have anything else to add. Dhananath Fernando 42:31 Yeah, basically to ask our that time that time we are charindra chandrasena 42:34 coming to um cover subject. I Dhananath Fernando 42:37 think we covered quite a lot, right? Yeah, we covered Speaker 1 42:39 pretty much everything. Yeah, we we we charindra chandrasena 42:40 we we on Speaker 1 42:41 this specific topic, yes. On this specific topic, charindra chandrasena 42:43 the the special message was actually we we couldn't find anybody capable of delivering the message like you can last week. Yeah, last Speaker 1 42:53 last week. I think last week the week before I completed Monday. Yeah, weekly. charindra chandrasena 42:56 So he did a he did a sort of a substandard job. So today you're back and probably Speaker 1 43:05 like probably like the government approval process. There charindra chandrasena 43:08 you go. So the real government is back now. Interesting. Yeah. Okay. Yeah. Yeah. Dhananath Fernando 43:16 Yeah. So please subscribe us. We have an Advocata Insider Programme, which you are supporting the policy work that we do. At the same time, you will get additional benefits like the analysis of the exchange rate, the interest rates, vehicle markets, the property markets, and it's 12,000 rupees a year, 1000 rupees a month. So become an Advocata Insider, and there's a Failure, I mean, comprehensive package as well, which is for 36,000 rupees per year. So become an Advocata insider and join our policy community because we make these conversations. It is brought free of charge thanks to our Advocata insiders. At the same time, we do a lot of economic research and providing the advocacy to shape up the public policy space in Sri Lanka, so help us and become an Advocata insider. All charindra chandrasena 44:07 right. Speaker 1 44:08 All right. charindra chandrasena 44:08 So thanks, guys, and we will see each other next week. Next week. Yeah. Well, nobody's going out of Colombo or the country. No, Speaker 1 44:18 no, no, no, no. So, but it's a long weekend. charindra chandrasena 44:21 Oh yes, it is a long weekend. Okay, so we see you refreshed. Yeah, yeah. I'll be refreshed as well. Yes. So I'll see you guys next week, and thank you to everybody for tuning in. We'll see you next week as well. Transcribed by https://otter.ai