Sri Lanka EPF under fire at 50 years, calls for independent management

Nov 30, 2008 (LBO) – Calls for independent management for Sri Lanka’s state-managed Employees Provident Fund are gaining more support, with less than half of respondents to a survey saying returns were “reasonable”, an influential weekly has said. Fifty years after the creation of EPF The Sunday Times newspaper said only 45.95 percent of respondents to a poll said the fund had achieved its objective of providing ‘a reasonable retirement benefit to its members.’

A similar proportion said the EPF did not give a reasonable return while 8.10 percent were undecided.

Sri Lanka has had very high inflation of around 20 percent a year, but returns earned by the EPF have been barely in double digits.

Inflating Debt

With most of the funds being invested in government securities, the real value (the value after discounting inflation) of private sector workers retirement savings have been systematically destroyed by the state in a sophisticated trick to ‘inflate away’ its debt burden.

“Since interest rates are not market determined, in times of high inflation this results in EPF members not earning ‘real rates of return’,” top financial analyst Murtaza Jafferjee was quoted as saying in The Sunday Times newspaper