As Central Bank bond scam rocks Sri Lanka the country’s foreign minister Ravi Karunanayake is made to put in his papers for his role in the fraud when he was finance minister a year ago.

Sri Lanka’s Foreign Minister Ravi Karunanayake has resigned. The immediate reason for his decision was a no-confidence motion tabled in Parliament by a group of MPs led by former President Mahinda Rajapakse, styling itself as the joint opposition, in the wake of a corruption scandal he has been embroiled in.
Karunanayake has had financial dealings with the main accused in a Central Bank bond scam, involving several billion rupees; a Presidential Commission of Inquiry is probing the scam.
The joint opposition is no more than Rajapakse loyalists and therefore in the Sri Lanka Freedom Party (SLFP), a partner in the coalition Unity Government of President Sirisena and Prime Minister Ranil Wickremasinghe. Many SLFP lawmakers indicated their intention to vote for the no-confidence motion, compounding the government’s crisis.
Karunanayake flatly denied any wrongdoing and tried to cling to his ministerial post. But under pressure from his cabinet colleagues, then the president and prime minister, he was compelled to resign.
The Sunday Times editorial on August 13 noted: “Unfortunately, Mr. Karunanayake took the correct decision to step down after some deliberation and some coaxing. By the end of last week, it appeared that he had to be dragged out of his ministry kicking and screaming… He argued somewhat justifiably why he had to be the fall guy-sacrificing lamb for doing his duty by
The bond scam took place under the newly-appointed Central Bank governor, Arjuna Mahendran, a confidante of Wickremesinghe. Mahendran’s son-in-law, Arjun Aloysius, was the principal director of Perpetual Treasuries, a regular bidder at bond auctions. In February 2015, the company had acquired bonds worth 5 billion rupees, at an inflated interest rate, in the biddings initially worth only 1 billion rupees.
Aloysius was accused of getting inside help, including information about the bond launch, particularly through the Central Bank governor, who was removed in April last year.
President Sirisena appointed the Commission of Inquiry, which exposed the role played by the government and especially Karunanayake. Amid growing criticism about his connection with Aloysius, Karunanayake was removed as finance minister and appointed foreign minister.
The inquiry further brought to light an undated letter from Karunanayake to the Central Bank governor requesting the raising of 70 billion rupees through bonds. It revealed that Aloysius had rented out a luxury apartment to Karunanayake in the immediate aftermath of the bond scam and paid 1.45 million rupees a month on the lease.
The Karunanayake family later purchased the apartment for 165 million rupees. Karunanayake claimed he knew nothing about the transaction, which took place via a company controlled by his wife.
Sirisena and Wickremesinghe on Aug 16 appointed Thilak Marapana as the new foreign minister. Marapana was also forced to resign under a cloud only a year ago. He was accused of defending Avant Guard, a company engaged in providing maritime security for commercial ships, which was accused of massive financial fraud.
R. Sambandan, the leader of the official opposition and the Tamil National Alliance (TNA), has hailed Karunanayake’s resignation as a “bold step,” saying Karunanayake had acted “in the interest of good governance and the people.”
The Janatha Vimukthi Peramuna (JVP), another opposition party, praised Karunanayake’s resignation, adding that corruption must be eliminated.
The Nava Sama Samaja Party (NSSP), Purawesi Balaya (Citizen’s Power), Movement for Social Justice and several other groups have attempted to turn the spotlight back onto the corruption of the Rajapakse government.
Meeting on Aug 15th, they have asked the government to set up “special courts” to prosecute the corrupt elements of the Rajapakse regime. The proposal has found favour with Health Minister Rajitha Senaratne, and deputy minister Ajith Perera, who spoke at the opposition gathering.