More voices are being raised against the stealthy appropriation of provident funds by the Sri Lanka government, through the use of negative real rates. More voices are being raised against the stealthy appropriation of provident funds by the Sri Lanka government, through the use of negative real rates. “Today we have inflation running at a certain percentage and deposit rates well below, and all the contractual savers are losing their investments,” says Ranjith Fernando, former General Manger of the National Development Bank told a joint ADB, World Bank policy development forum, coinciding with the release of a report on Sri Lanka’s weakening investment climate.
“The provident fund people are today denied the right interest rates in what you call in the report financial repression. Captive funds are mobilised by the government at a lesser rate than what the people deserve, because of inflation.”
Fernando says some previous governments have also not given optimum rates to the ‘captive’ funds.
Sri Lanka’s inflation started to shoot up from the middle of 2004, as the government fiscal position deteriorated and the treasury turned to Centra