## tarea2024102-print-pdf ## Source details **Canonical URL:** [tarea2024102-print-pdf](https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024102-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/tar/2024/english/tarea2024102-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/tar/2024/english/tarea2024102-print-pdf.pdf.json) --- ### Executive Summary — overview and mission context - Joint World Bank–IMF mission visited Colombo during February 20–March 3, 2023, to support the government of Sri Lanka in designing a Debt Management Reform Plan, prioritizing reform of the debt management institutional and legal framework. - Establishing a National Debt Management Agency/Office is a priority reform of the 2022 interim budget and a commitment under the IMF Extended Fund Facility (EFF) arrangement and the proposed World Bank Development Policy Operation (DPO). - As at the date of publication of this report, the authorities drafted and submitted a new Public Debt Management Act to Parliament, which was enacted on June 18, 2024. The authorities are also in advanced stages of finalizing the Public Debt Management Office Regulations which will also be submitted to Parliament. - The mission presented findings to MoF and CBSL representatives; the Secretary to the Treasury and CBSL representatives agreed with the mission’s recommendations. ### Macroeconomic background and key statistics - Crisis and program: - Government defaulted on international sovereign bonds in April 2022. - A four-year EFF arrangement was approved by the IMF Executive Board on March 20, 2023, following a staff-level agreement on September 1, 2022. - Arrangement priorities include: achieve revenue-based fiscal consolidation with strong social safety nets; restore public debt sustainability including through debt restructuring; restore price stability and rebuild reserves. - Debt and financing metrics: - Public debt reached 128 percent of GDP at end-2022. - Fiscal deficit in 2022: -10.6 percent. - Exchange rate depreciation in 2022: 57 percent. - Economic contraction in 2022: -8.7 percent. - Annual gross borrowing needs rose to 34.6 percent of GDP in 2022. - Economy projected to contract by 3 percent in 2023 and gradually recover to a +3 percent trend by 2026. - Fiscal primary expenditure in 2022: 20 percent of GDP. - Revenue in 2022: 8 percent of GDP. - Debt levels likely to remain high at about 95 percent of GDP over the medium term (assuming debt restructuring). - Gross financing needs expected to fall from 34 percent to below 13 percent of GDP, assuming the debt restructuring. - Inflation and interest environment: - Inflation was 46 percent in 2022. - Projected inflation: 28 percent in 2023, then gradually decline to the long-term trend of 5 percent. - Domestic government bond yields currently at elevated levels (about 30 percent) across the yield curve. - Government guarantees and concentration: - Outstanding government-guaranteed debt decreased from US$7.4 billion to US$5.6 billion at end-September 2022 after calling guarantees; these obligations were reclassified as central government direct debt. - Only 11 percent of 240 government guarantees are in foreign currency, but the value of foreign-currency guarantees accounts for 71 percent of the total stock. - CPC’s guaranteed debt: US$2.6 billion, which accounts for 46.7 percent of the total guaranteed debt portfolio. - Market and banking sector constraints: - Financial sector sized at about100 percent of GDP. - Banking sector exposure to the public sector is already large at over 40 percent of total assets. - Some state-owned banks have government exposure over 60 percent of total assets. - Short-term (ST): within 12 months; medium-term (MT): within 24 months. ### Key diagnostic findings on legal and institutional frameworks - Fragmented public debt management legal framework and PDM functions across departments within the MoF and the CBSL contributed to: - Lack of coherent management of public debt. - Lack of comprehensive public debt reporting. - Sub-par debt transparency and weak management of public guarantees. - Fragmentation specifics: - No overarching law on public finance; multiple laws touch debt (e.g., Fiscal Management (Responsibility) (FMR) Act 2003; Foreign Loans Act 1957; Local Treasury Bills Ordinance 1929; Registered Stock and Securities Ordinance 1937; Active Liability Management Act 2018; Financial Regulations 1992). - Article 3 of the FMR Act 2003 sets a guarantees limit that was increased over time to 15 percent of GDP (effective January, 1 2021). - Institutional scope of “public debt” is unclear; “government” not defined in primary debt laws. - Operational fragmentation and duplication: - Duplication of public debt databases and recording and reporting functions across MoF and CBSL. - Only 37 staff grade officials out of the 125 officials in ERD perform functions related to borrowing activities; many ERD functions are nonborrowing. - CS-DRMS license expired in June 2022; vendor maintenance discontinued, posing operational risk. ### Recommendations — legal framework and PDM law (summary) - Introduce a consolidated PDM legal framework, preferably a dedicated PDM law to: - Establish the DMO and define its mandate. - Define governance and accountability for PDM, with Parliament delegating borrowing authority to the Minister of Finance and setting PDM objectives. - Embed transparency requirements, including annual reporting to Parliament on progress of the debt management strategy. - Strengthen legal framework for loan guarantees and on-lending arrangements to limit excessive fiscal risks. - Define “public debt” comprehensively to include instruments that create debt-like obligations and assumption of payment liabilities under a loan guarantee. - Require preparation, Cabinet-level approval, publication, and rolling annual updates of an MTDS consistent with the MTFF; require preparation and publication of an ABP aligned with the MTDS. - Clarify borrowing authority and delegation, and specify authority to issue guarantees and on-lend, with required credit risk assessment and monitoring. ### Recommendations — location, status, and governance of the DMO - Establish the DMO inside the Ministry of Finance (MoF), consistent with practices in a vast majority of emerging markets and developing economies. - Mission assessment: preconditions for establishing the DMO as a “separate statutory body” were not met and are unlikely to be in place for the foreseeable future. Preconditions listed include: stable macroeconomic environment; well-developed domestic debt market; access to the international capital market; well-trained staff in both the principal entity (MoF) and the agency. - Regardless of location, require a medium-term debt management strategy (MTDS) approved by the Cabinet of Ministers to strengthen DMO’s operational independence. ### DMO internal organization — functional structure and staffing - Recommended functional structure: - Front office: central government borrowing, guarantees and on-lending, ABP development, investor relations. Move international bonds and syndicated loans from ERD Capital Markets Division to DMO front office. - Middle office: debt strategy (MTDS), risk management, compliance, debt service forecasting. - Back office: debt recording, payment instructions, settlement, reporting, maintenance of DMIS. - Organizational options considered: - “One Department” option: expand ERD into a Public Debt Management Office (includes nonborrowing development functions). - “Two Departments” option (recommended): form smaller ERD focused on official-sector relationships; DMO focused on financing central government. - Staffing and HR: - DMO must attract and retain staff experienced in financial markets and financial modeling. - Base pay supplemented by allowances, noncash benefits, and a defined-benefit pension scheme; tools include secondments, individual contracts, specialized cadre, special incentives, override of rotation policy (five years). ### Transition and operational sequencing for domestic borrowing - Current practice: annual financing strategy estimates net external borrowing first; domestic financing treated as residual, with residual allocated to T-bond issuance. - Mission recommends transfer of domestic auction program responsibilities from CBSL to MoF (DMO). Transitional options: - Option A: CBSL PDD front office acts as agent for DMO under an agency agreement; DMO front office appoints staff to work closely with CBSL. - Option B: Transfer function when DMO is formed with secondments from CBSL and possible hiring of private sector staff or consultants. - Transition likely to last at least two years; some countries retain the agency role for many years. - Tender Board and Domestic Debt Management Committee (DDMC) to be abolished. ### Back office, IT systems, DMIS, and data consolidation - Back office lead responsibilities: - Consolidate debt reporting and information, eliminating duplication across ERD Debt Management Division, PDD middle office, and PDD back office. - Provision and maintenance of specialized IT systems (DMIS) for all debt, including domestic and external. - Settlement, recording, issuance of payment instructions, recording of guarantees and on-lending, and recovery actions where needed. - Current systems and gaps: - CS-DRMS used since 1986; current version outdated with limited domestic securities support; license expired June 2022. - PDD uses Excel and Access databases for domestic debt recording; LankaSecure hosts CDS and LankaSettle supports clearing/settlement but lacks key trading functionalities. - Integration gaps: Treasury Financial Management System not integrated with CS-DRMS. - Recommended urgent actions: - Acquire a new debt recording system license (Meridian from Commonwealth Secretariat or DMFAS from UNCTAD) without waiting for formal DMO establishment. - Consolidate all central government debt data into the new system, including domestic securities and guaranteed debt. - Continue LankaSecure as CDS and LankaSettle as settlement architecture; develop/purchase a modern system when resources available. - Review and replace existing databases at MoF and CBSL, formalize procedures manuals, and integrate DMIS with Treasury FM system. - Address National Audit Office Special Audit Report on Financial Management and Public Debt Control in Sri Lanka 2018-2022 via a predefined action plan. ### Debt transparency, publications, and timelines - Sound practices recommended: - Regular publication (monthly or quarterly) of outstanding stock, composition of debt and financial assets, and loan guarantees and other contingent liabilities with currency, maturity, and interest rate structure. - Publish MTDS, ABP, annual debt management report, debt bulletins with defined frequency, content, and timeframes. - Shorten auction-results publication lag to one hour or less once processes reviewed and DMO established. - Current transparency issues: - Wide range of central government debt disclosed but with timeliness, coverage, and consolidation deficiencies. - No published ABP and last published MTDS covered 2019–23 and has not been updated. - MoF started publishing a quarterly debt bulletin in 2022; many reports published with lags of three or more months. - PDD’s Public Debt Management in Sri Lanka report often published more than six months after the end of the base year; scope excludes sovereign guarantees or NFPS debt. - Recommended immediate reporting actions: - Establish a working group/taskforce to review published debt reports and data to reduce duplication, improve timeliness, and eliminate inconsistencies. - Resume publication of quarterly auction calendars (when conditions permit) and potentially include indicative amounts for T-bills. - Publish revised MTDS and an ABP on MoF’s and CBSL’s websites; consider investor relations area. ### Guarantees and on-lending — risks, governance, and recommendations - Current situation and risks: - Guaranteed loans and on-lending used interchangeably; decisions often determined by lender preference rather than borrower capacity. - TOD currently principal entity for issuance of loan guarantees and on-lending; no legal/regulatory framework defines TOD roles. - MoF recommendations against guarantees are not binding; Cabinet sometimes approves guarantees exceeding FMR Act limits citing “national interest”. - Government does not charge fees to recipients of guarantees or sub-borrowers of on-lent funds; no contingency funds or other risk mitigation instruments in use. - Priority recommendations: - Develop a legal, institutional, and operational framework for guarantees and on-lending. - Transfer all guarantee-related functions from TOD to the DMO. - Require credit risk analysis focused on borrower’s capacity to repay before issuing guarantees; discontinue guarantees to nonperforming borrowers. - Introduce guarantee fees based on credit risk; consider depositing fees into a contingency fund to hedge default risk. - Develop an on-lending policy: restrict on-lending to cases of subsidy or “national interest”, consider using direct budgetary subsidy instead of on-lending where appropriate. - Establish recording, monitoring, reporting, calling, and recovery procedures; require NFPS entities to inform the DMO of borrowing activities. - Medium-term measures: - Develop quantitative risk limits and introduce guarantee fees as a risk mitigation instrument. - Disclose expected losses based on associated credit risks and probabilities of default. ### Coordination, committees, advisory roles, and operational risk - Recommended governance and coordination bodies: - Establish an advisory committee to support senior management oversight of the DMO (subject to conflict-of-interest checks and confidentiality agreements). - Establish a Debt Management Coordinating Committee (DMCC) chaired by the Director General of the DMO with representatives from CBSL, TOD, ERD, Department of Fiscal Policy, and managers of front/middle/back offices. - Operational risk management: - Middle office to lead operational risk framework covering fraud, human error, noncompliance, reputational threats, third-party failure, cybersecurity, and premises access. - Develop business process reengineering to improve efficiency, eliminate duplication, and reduce operational risk. - Develop business continuity and disaster recovery plans as part of the new DMO. ### Implementation sequencing, capacity building, and TA - Short-term priorities (selected): - Establish the DMO as a department in the MoF by consolidating debt management functions of ERD, TOD, and PDD, except LankaSecure operations remain at CBSL and cash management remains at TOD. - Choose and acquire a new debt recording system license; include all debt-related data in the new system. - Abolish the Tender Board and DDMC. - Support establishment of advisory and coordinating committees. - Provide online MTDS training for middle office staff and ABP training for front office staff; additional training on yield curve, forward curve, and interest rate parity. - Medium-term priorities (selected): - Transfer domestic auction program responsibilities from CBSL. - Conduct MTDS analysis using the MTDS analytical tool and prepare/publish a rolling annual MTDS consistent with MTFF. - Publish ABP and auction calendar; shorten auction-results publication lag to up to one hour. - Develop an on-lending policy and introduce guarantee fees; disclose expected losses (timelines in Annex I: actions spanning Mar-23 to Dec-26). - TA and external support: - Mission stands ready to provide further technical assistance; noted support from a Japan Sub-Account Trust Fund to finance a long-term debt expert to be stationed at SARTTAC to assist Sri Lankan authorities. - WB/IMF TA to support improved risk analysis capacity, development of on-lending policy, and disclosure of expected losses. ### Selected exact figures and implementation dates cited in the report - Mission visit dates: February 20–March 3, 2023. - ERD staffing: 37 staff grade officials out of the 125 officials performing functions related to borrowing activities. - Public debt: almost 130 percent of GDP in 2022. - Public Debt Management Act enacted: June 18, 2024. - Monetary Law Act amendment approved: July 20, 2023. - Public debt reached 128 percent of GDP at end-2022. - Fiscal deficit in 2022: -10.6 percent. - Exchange rate depreciation in 2022: 57 percent. - Economic contraction in 2022: -8.7 percent. - Annual gross borrowing needs rose to 34.6 percent of GDP in 2022. - Inflation was 46 percent in 2022; projected 28 percent in 2023; long-term trend 5 percent. - CS-DRMS license expired in June 2022. - Guarantee stock decreased from US$7.4 billion to US$5.6 billion at end-September 2022. - CPC’s guaranteed debt: US$2.6 billion (46.7 percent of guaranteed portfolio). - Fiscal Management (Responsibility) Act guarantee limit amended to 15 percent of GDP (effective January, 1 2021). - Short-term (ST): within 12 months; medium-term (MT): within 24 months. - Annex I action timelines include Mar-23 to Dec-26 for various reforms and TA-supported activities. *Source: tarea2024102-print-pdf (selected excerpts).* ### Executive Summary ...................................................................................................... ### Executive Summary ### Overview and mission context - A joint World Bank–IMF mission visited Colombo during February 20–March 3, 2023, to support the government of Sri Lanka in designing a Debt Management Reform Plan, prioritizing reform of the debt management institutional and legal framework. - Establishing a National Debt Management Agency/Office is a priority reform of the 2022 interim budget and a commitment under the IMF Extended Fund Facility (EFF) arrangement and the proposed World Bank Development Policy Operation (DPO). - As at the date of publication of this report, the authorities drafted and submitted a new Public Debt Management Act to Parliament, which was enacted on June 18, 2024. The authorities are also in advanced stages of finalizing the Public Debt Management Office Regulations which will also be submitted to Parliament. - The mission presented findings to MoF and CBSL representatives. The Secretary to the Treasury and CBSL representatives agreed with the mission’s recommendations. ### Macroeconomic and institutional background - The authorities recognize urgency of establishing a consolidated DMO to manage public debt—almost 130 percent of GDP in 2022. - To secure central bank independence, divest the debt management functions from the CBSL, and prohibit monetary financing of the government, on July 20, 2023, the Parliament approved the amendment of the Monetary Law Act incorporating these changes. - Past TA and assessments include TA dating to 2002, the 2019 IMF mission (which recommended a statutory agency outside the MoF), and the 2022 World Bank DeMPA mission, which identified weaknesses driven by a fragmented institutional setup and duplication of functions. ### Key findings - Fragmented public debt management legal framework and PDM functions across departments within the MoF and the CBSL contributed to: - Lack of coherent management of public debt. - Lack of comprehensive public debt reporting. - Sub-par debt transparency and weak management of public guarantees. - Duplication of public debt databases and recording and reporting functions exist across MoF and CBSL. - Only 37 staff grade officials out of the 125 officials in ERD perform functions related to borrowing activities; many ERD functions are nonborrowing. - LankaSecure operations should remain at the CBSL; cash management should remain at the Treasury Operations Department (TOD). ### Recommendations — legal framework - Introduce a new public debt management (PDM) law to: - Establish the DMO and define its mandate. - Define the governance and accountability framework for PDM, stemming from Parliament delegating authority to borrow and issue guarantees to the Minister of Finance and setting PDM objectives. - Embed transparency requirements, including annual reporting to Parliament on progress of the debt management strategy. - Strengthen the legal framework for loan guarantees and on-lending arrangements to limit excessive fiscal risks. ### Recommendations — location and status of the DMO - Establish the DMO inside the Ministry of Finance (MoF), consistent with practices in a vast majority of emerging markets and developing economies. - The mission assessed that preconditions for establishing the DMO as a “separate statutory body” were not met and are unlikely to be in place for the foreseeable future. Preconditions include: - Stable macroeconomic environment. - Well-developed domestic debt market. - Access to the international capital market. - Well-trained staff in both the principal entity (MoF) and the agency. - Regardless of location, a medium-term debt management strategy (MTDS) approved by the Cabinet of Ministers is the key instrument to strengthen the DMO’s operational independence. ### Recommendations — internal organization of the DMO - Two organizational options were considered: including and excluding multilateral and bilateral relationship management functions carried out by the ERD. - The mission recommended excluding nonborrowing ERD functions, creating a small group of specialized professionals narrowly focused on PDM functions, and retaining ERD as a separate department. - Structure the DMO along functional lines: - Front office: central government borrowing, guarantees and on-lending, ABP development, investor relations. - Middle office: debt strategy, risk management, compliance, debt service forecasting. - Back office: debt recording, payment instructions, reporting. - Establish an advisory committee to support senior management oversight of the DMO. - Establish a coordinating committee, chaired by the head of the DMO, with membership from TOD, ERD, Department of Fiscal Policy (MoF), and Domestic Operations, International Operations, and Economic Research departments of the CBSL. - Abolish the Tender Board and the Domestic Debt Management Committee (DDMC). - Transfer domestic auction program responsibilities from the CBSL to the MoF. ### Recommendations — debt transparency and data systems - Consolidate debt data management and recording to eliminate duplication and inconsistencies. - Decide on and acquire a new debt recording system and respective license. - Include all debt-related data (including domestic securities and guaranteed debt) in the new debt recording system. - Review and, to the extent possible, replace existing databases at MoF and CBSL to make data available for multiple purposes in the new system. - Address audit recommendations related to debt recording outlined in the Special Audit Report on Financial Management and Public Debt Control in Sri Lanka 2018-2022. - Establish a working group/taskforce to review published debt reports and data to reduce duplication, improve timeliness, and eliminate inconsistencies. - Resume publication of quarterly auction calendars (once conditions permit) and potentially include indicative amounts for T-Bills. - Shorten the time lag for publishing auction results to one hour or less. ### Recommendations — guarantees and on-lending - Develop a legal, institutional, and operational framework for the management of government guarantees. - Transfer all guarantee-related functions from TOD to the DMO. - Develop quantitative risk limits and propose introduction of guarantee fees as a risk mitigation instrument. - Develop an on-lending policy. - Disclose expected losses based on associated credit risks and probabilities of default. ### Capacity building, strategy, and operational steps - Prepare and publish a medium-term debt management strategy (MTDS) on a rolling annual basis, ensuring consistency with the MTFF and the budget. - Develop the annual borrowing plan (ABP) and publish the ABP and auction calendar. - Conduct the MTDS analysis using the MTDS analytical tool. - Conduct business process reengineering to improve efficiency, remove duplication, and reduce operational risk. - Develop online staff training on MTDS and ABP; additional training areas include understanding the yield curve, forward curve, and concept of interest rate parity. - Establish a high-level committee to direct and monitor DM legal framework reform and appoint a “reform champion”. - Coordinate drafting of the PDM law closely with drafting of the public financial management law and relevant WB and IMF TA. ### Next steps and implementation priorities - Authorities will begin drafting the PDM law and implement reforms that can be carried out ahead of formal establishment of the new DMO. - The mission stands ready to provide further technical assistance (TA) and noted support from a Japan Sub-Account Trust Fund to finance a long-term debt expert to be stationed at SARTTAC to assist Sri Lankan authorities. ### Key statistics and exact figures cited - Mission visit dates: February 20–March 3, 2023. - ERD staffing: 37 staff grade officials out of the 125 officials performing functions related to borrowing activities. - Public debt: almost 130 percent of GDP in 2022. - Public Debt Management Act enacted: June 18, 2024. - Monetary Law Act amendment approved: July 20, 2023. - Short-term (ST): within 12 months; medium-term (MT): within 24 months. *Source: Executive Summary, Debt Management Reform Plan TA mission report (World Bank–IMF).* ### 6. This TA makes recommendations for reforming both the legal and institutional ### 6. This TA makes recommendations for reforming both the legal and institutional frameworks ### Summary and purpose - The TA recommends reforms to both the legal and institutional frameworks to ensure the proposed institutional reform is grounded in governance, accountability, and transparency enshrined in the legal framework. - The recommendations set strategic reform priorities and do not cover implementation details. - Structure of the report: - Section II: Macroeconomic conditions and public debt developments in Sri Lanka. - Section III: Legal framework. - Section IV: Institutional framework. - Section V: Public debt transparency. - Section VI: Management of government guarantees and on-lending of borrowed funds. - Annex I: Logframe with specific actions, sequencing, and expected outcomes. *Key contextual notes from the TA:* - The current TA proposes the new DMO to be established within the Ministry of Finance. - The DeMPA is a diagnostic tool used to evaluate a country’s debt management processes and institutions. - The term “debt management office” (DMO) is used generically to refer to the area that manages public debt; it does not imply a particular institutional arrangement. - Sound practices referenced are based on the World Bank-IMF Revised Guidelines for Public Debt Management (2014). ### II. Macroeconomic background — key findings and statistics - Crisis and program: - Government defaulted on international sovereign bonds in April 2022. - A four-year extended fund facility (EFF) arrangement was approved by the IMF Executive Board on March 20, 2023, following a staff-level agreement on September 1, 2022. - Arrangement priorities: achieve revenue-based fiscal consolidation with strong social safety nets; restore public debt sustainability including through debt restructuring; restore price stability and rebuild reserves. - Debt and financing metrics: - Public debt reached 128 percent of GDP at end-2022. - Fiscal deficit in 2022: -10.6 percent. - Exchange rate depreciation in 2022: 57 percent. - Economic contraction in 2022: -8.7 percent. - Annual gross borrowing needs rose to 34.6 percent of GDP in 2022. - Economy projected to contract by 3 percent in 2023 and gradually recover to a +3 percent trend by 2026. - Fiscal primary expenditure in 2022: 20 percent of GDP. - Revenue in 2022: 8 percent of GDP. - Debt levels likely to remain high at about 95 percent of GDP over the medium term (assuming debt restructuring). - Gross financing needs expected to fall from 34 percent to below 13 percent of GDP, assuming the debt restructuring. - Inflation and interest environment: - Inflation was 46 percent in 2022. - Projected inflation: 28 percent in 2023, then gradually decline to the long-term trend of 5 percent. - Domestic government bond yields currently at elevated levels (about 30 percent) across the yield curve. - Monetary finance provided by the CBSL (overdraft and T-bill purchases) is set to gradually unwind, increasing domestic market financing needs. - Government guarantees and concentration: - Outstanding government-guaranteed debt decreased from US$7.4 billion to US$5.6 billion at end-September 2022 after calling guarantees; these obligations were reclassified as central government direct debt. - Ceylon Petroleum Corporation (CPC), Road Development Authority, National Water Supply & Drainage Board, Ceylon Electricity Board, and Sri Lankan Airlines Limited account for almost 90 percent of the remaining guaranteed debt stock. - Only 11 percent of 240 government guarantees are in foreign currency, but the value of foreign-currency guarantees accounts for 71 percent of the total stock. - CPC’s guaranteed debt: US$2.6 billion, which accounts for 46.7 percent of the total guaranteed debt portfolio. - Market and banking sector constraints: - Domestic market financing is supported by large pension funds and a financial sector sized at about100 percent of GDP. - Banking sector exposure to the public sector is already large at over 40 percent of total assets. - Some state-owned banks have government exposure over 60 percent of total assets. - Renewed access to international capital markets will take time; domestic access is limited and expensive given restructuring uncertainty. - Policy measures: - Authorities have imposed emergency import restrictions to manage the foreign exchange shortage. ### III. Legal framework — sound practices (recommended legal principles) - Consolidated PDM legal framework: - A consolidated public debt management (PDM) legal framework in a single law supports sound public debt management. - Consolidation options: a single chapter in a public financial management (PFM) law or a dedicated PDM law. - Benefits of consolidation: - set guiding principles and a consistent framework for public debt management; - clarify governance, accountability, and transparency by establishing responsibilities of government units managing public debt; - establish a framework for managing contingent liabilities from guarantees and public enterprise borrowing; - avoid piecemeal reforms that fragment the legal framework. - Governance provisions to include in PDM law: - Clear division of responsibilities: Parliament sets long-term debt objectives; the executive approves strategy; a designated entity (the DMO) formulates and implements strategy, services debt, settles transactions, records and reports debt. - Where central bank conducts debt management activities, formalize roles through agency agreements or secondary legislation. - Public disclosure of roles, responsibilities, and objectives. - Definition and coverage: - The definition of public debt should address: - institutional coverage (which public institutions’ debt liabilities are subject to PDM law); - coverage of instruments (debt securities, loans, derivatives). - For debt recording and reporting, consider extending scope beyond the central government to nonguaranteed debt of entities in the nonfinancial public sector (NFPS) to facilitate oversight of contingent liabilities. - Legal requirements for strategy and borrowing plans: - Primary law should set debt management objectives and require development of a Medium-Term Debt Strategy (MTDS) and adoption of an Annual Borrowing Plan (ABP). - Legal requirement should include MTDS approval at Cabinet level, publication, and ex-post reviews; ABP should align annual borrowing with MTDS. - Borrowing authority and delegation: - PDM law should clarify sole delegation of authority to the Minister of Finance to borrow on behalf of the state, specifying entity with borrowing authority, limits, and processes for borrowing operations. - Guarantees and on-lending: - Primary legislation should clearly define which entity has authority to issue guarantees and on-lend borrowed funds. - Recommended policy framework components for guarantees and on-lending: - control: setting limits and centralizing issuance; - decision-making process: purpose, eligibility, conditions, cost and risk evaluation, fees, processes and procedures; - monitoring: recording and reporting risks, ensuring payment, and recovery planning. - Transparency and accountability provisions: - Legal provisions should mandate publications and disclosure (MTDS, ABP, annual debt management report, debt bulletins) specifying roles, frequency, minimum content, and publication timeframe; allow Executive Branch flexibility for detailed format in regulations. - Audit frameworks: Audit Act should mandate the supreme audit institution with broad coverage to subject PDM activities to external scrutiny (financial, compliance, and performance audits) and require public disclosure of external audit reports within a reasonable timeframe. - Debt limits: - Preferable that quantitative debt limits (including limits on government guarantees) are not set in PDM law; such limits are fiscal decisions better placed in PFM law or Fiscal Responsibility Management Law, and annual limits in the budget or appropriation law. ### III. Legal framework — current situation in Sri Lanka (diagnostic findings) - Fragmentation and legal instruments: - Sri Lanka’s legal framework for PDM is fragmented. - Constitution grants Parliament “full control” over public finances, restricts provincial councils from enacting statutes on government public debt, and mandates the Auditor General to audit public debt. - No overarching law on public finance; key laws include: - Fiscal Management (Responsibility) (FMR) Act 2003 (main law on fiscal planning and responsibility), which establishes ceilings on public debt and stock of guarantees and restricts government borrowing from the central bank. - Foreign Loans Act 1957 as amended. - Local Treasury Bills Ordinance 1929 as amended. - Registered Stock and Securities Ordinance 1937 as amended. - Active Liability Management Act 2018. - Financial Regulations 1992 provide some rules on contracting foreign loans. - Article 3 of the FMR Act 2003 includes an objective limiting guarantees as a percentage of GDP; the limit was amended through Acts No. 15 of 2013, No. 13 of 2016, and No. 12 of 2021 to increase the limit to 15 percent of GDP (effective January, 1 2021). At the time of its introduction the limit was 4.5 percent of GDP. - Ambiguities in definitions and coverage: - The institutional scope of the definition of “public debt” is unclear; “government” is not defined in primary laws on public debt. - It is unclear whether “government” refers only to the budgetary central government or also includes other public sector entities; the status of extrabudgetary units is unclear. - Some public entities appear to be extrabudgetary units authorized to incur liabilities and enter contracts, including borrowing funds. - Instrument coverage gaps: - The range of instruments comprising public debt is not exhaustively captured; multiple laws cover specific instruments (loans, T-bills, T-bonds, promissory notes), and the law includes issuance of debt securities as part of rescheduling schemes. - Laws do not cover other financial obligations with loan-like characteristics, such as supplier’s credit agreements and finance leases. *Italicized source attribution:* _Source: tarea2024102-print-pdf (sections II–III)_ ### 26. The existing legal framework does not state the long-term objectives for public ### 26. The existing legal framework does not state the long-term objectives for public debt management. Likewise, there are no requirements for the development, approval, publication, and implementation of a MTDS and an ABP. ### Legal framework gaps and coverage - The legal framework does not state long-term objectives for public debt management. - There are no legal requirements for: - the development, approval, publication, and implementation of a medium-term debt strategy (MTDS); and - the development, approval, publication, and implementation of an annual borrowing plan (ABP). - The legal framework guiding issuance of government guarantees and on-lending is limited: - The Foreign Loans Act No. 29 of 1957, as amended, authorizes the President to sign on behalf of the state government guarantees relating to foreign loans to a public corporation or public enterprise.10 - There are no other legal or regulatory provisions that guide the issuance of guarantees or on-lending. ### Fiscal agency role and central bank mandate - The Monetary Law Act requires the CBSL to manage public debt, allowing a broad fiscal agency role that: - does not clearly distinguish the government’s role as principal; and - may result in inconsistency with the CBSL’s core mandate. - The sweeping language allows the purchase of government securities in the primary market and monetary financing to the government. - The authorities plan to amend these provisions (forthcoming revision of the Monetary Law Act). ### Reporting, audits, and disclosure - Reporting requirements: - The FMR Act Articles 10, 11, and 12 require semi-annual publication and submission to Parliament of a Mid-year Fiscal Position Report that includes a statement of the estimated and actual borrowings for the first four months of the fiscal year. - Articles 13, 14, and 15 require annual publication and submission to Parliament of a Final Budget Position Report that includes a statement of, among others, the estimated and actual borrowings for the fiscal year. - There is no requirement for the central government to report the debt of public sector entities together with their guarantees. - Audits: - Under the Sri Lankan constitution (Articles 153 and 154), the Auditor General (AG), appointed by the President, is responsible for external financial audits of all government accounts.11 - The AG also reviews accounts of local authorities, public corporations, business undertakings vested in government, and companies in which the government or a public corporation or local authority holds 50 percent or more of its shares, and must submit annual financial audits of Sri Lanka’s Consolidated Fund and all entities under its audit remit.12 - All audit reports are submitted to Parliament and published on the official website of the National Audit Office. - Internal audit: - Establishing internal audit units in large MoF departments is required under the Financial Regulations (FRs 133-134), but internal auditors’ coverage of debt management operations is likely to lack comprehensiveness given institutional fragmentation. ### Issues identified - Fragmented legal framework perpetuates a fragmented institutional framework and can impede institutional reform. - The Monetary Law Act revision will require vesting a new public debt management mandate to the MoF and the debt management entity. - Lack of a comprehensive definition of “public debt” risks excluding instruments that create debt-like obligations or the assumption of payment liabilities under a loan guarantee. - Borrowing authority is scattered among the President, the Minister of Finance, and, for public corporations, concurrent authority of the MoF and supervising line ministries. - No current requirement to develop and publish an MTDS; the last published debt management strategy covered 2019-23 and has not been updated since. - Current practice plans financing on an annual basis, lacking medium-term orientation. ### Key recommendations (legal reform and PDM law) - Consolidate the fragmented legal framework as a key driver of PDM law reform. - Enact a dedicated PDM law to: - Consolidate the PDM legal framework. - Vest a consolidated debt management office (DMO) in the MoF. - Strengthen institutional arrangements for PDM functions, including authority to borrow, issue new debt, hold assets for cash management, and undertake other transactions on government’s behalf. - Define “public debt” comprehensively to include: - instruments that create debt-like financial obligations; and - assumption of payment liabilities under a loan guarantee. - Establish long-term objectives for debt management to anchor the MTDS and serve as benchmark for evaluating outcomes. - Require preparation, Cabinet-level approval, publication, and rolling annual updates of an MTDS consistent with the medium-term fiscal framework (MTFF); specify MTDS scope and content and require reporting on implementation against objectives. - Require preparation and publication of an ABP in line with the MTDS. - Require submission to Parliament of an annual report evaluating compliance of debt management operations with the MTDS. - Require publication of debt management policies and operations. - Establish mechanisms to enforce accountability and provide assurances of integrity. - Require NFPS entities to inform the DMO of their borrowing activities and require the central government to report the debt of NFPS entities (together with their guarantees). - Establish legal authority to issue guarantees and undertake on-lending, clarify purpose, require evaluation and credit risk assessment before issuance, and establish and monitor risk mitigation measures. - Clarify the CBSL’s fiscal agency mandate through a fiscal agency agreement or memorandum of understanding and define operational details of the agency relationship. - Legal support for the DMO should state responsibilities, accountability, and transparency frameworks to: - strengthen the mandate and enable operational independence from political interference; and - codify separation of debt management and monetary policy objectives and accountabilities. - Coordinate PDM legal reform with other reforms (new PFM law, public enterprises sector reform) to prevent overlaps and conflicting provisions. ### Institutional framework: sound practice and current situation - Sound practice: - Consolidation of PDM responsibilities into one entity facilitates a single public debt database, coherent debt management strategy, annual borrowing plan, and efficient execution. - Institutional forms vary: within-the-MoF DMOs are common in emerging markets and developing countries; statutory bodies or agencies outside the MoF are more common in high-income countries. - Internal DMO setup should segregate tasks across front, middle, and back offices to control operational risk. - Effective DMO requires adequate staffing, appropriate remuneration and promotion prospects, formal staff training programs, and specialized IT systems for a centralized public debt database. - Regular coordination among debt managers, fiscal authorities, cash managers, and central bank staff is essential; coordination can be supported by committees with defined mandate, membership, and meeting schedules. - Current Sri Lanka situation: - External borrowing is arranged and managed by the ERD at the MoF; ERD manages relationships with bilateral and multilateral partners and has a back office for external debt recording and payments. - Domestic debt is largely managed by the PDD of the CBSL, organized along functional lines: - Front office: securities issuance in the local market (auctions), including Sri Lanka development bonds denominated in US dollars; auction results decided by the Tender Board (senior CBSL staff and MoF representatives); facilitates Domestic Debt Management Committee (DDMC) recommending monthly domestic borrowing plan for approval by the Governor of the CBSL. - Middle office: reporting, domestic debt recording, debt service forecasting, annual borrowing plan, input to MTDS work. - Back office: settlements and domestic and foreign-currency payments. - The TOD of the MoF produces an annual borrowing plan, prepares debt service forecasts, participates in the Tender Board and DDMC, arranges debt-related payments, and records debt transactions in financial management systems. - Eurobond issuance follows a separate structure: a Cabinet-appointed steering committee guides the program; CBSL handles the issuance process; ERD records and initiates payment instructions after issuance. - There is currently no requirement to develop and publish the debt management strategy; the last published MTDS covered 2019-23 and has not been updated. *Source: tarea2024102-print-pdf - 26. The existing legal framework does not state the long-term objectives for public* ### 48. At present, the annual financing strategy consists of first estimating the net ### tarea2024102-print-pdf - 48. At present, the annual financing strategy consists of first estimating the net ### Current annual financing practice and issues - Annual financing strategy: estimate net external borrowing first; treat domestic financing as a residual. - Net external financing: determined by considering upcoming maturities and available sources of financing, with input from the ERD. - Domestic financing: residual determined by the Annual Government Borrowing Program produced by the TOD and approved at the Revenue and Cash Flow Management meeting. The program: - establishes a limit on T-bills (issued to the market); - sets target issuance of Sri Lanka Development Bonds (SLDBs); - specifies targets to borrow from offshore banking units. - Residual financing needs allocated to T-bond issuance. Draft Annual Government Borrowing Program submitted to the Monetary Board, which proposes it to the Secretary to the Treasury for approval. The plan is not published. - Annual budget discloses aggregate net external and domestic financing, but domestic borrowing assumptions are not derived bottom-up and have been unrealistic in recent years. - When auction funding shortfalls occur, the balance is met by issuing Treasury bills to the CBSL, leading to large accumulation of CBSL holdings of government paper. ### Recommendation: establish a DMO in the MoF - Mission recommends establishing the DMO as a department in the MoF. Finance ministry and central bank officials expressed support. - The DMO would have equal standing to other MoF departments (Fiscal Policy, National Budget, Treasury Operations, External Resources, State Accounts, Public Enterprises, Legal Affairs). ### Requirements to accommodate a modern DMO - Legal framework: - Debt management established as a separate policy area with specialized function, accountability, and transparency. - Develop and publish a MTDS and regular reporting (discussed in Section V). - Staffing and human resources: - DMO must attract and retain staff experienced in financial markets and financial modeling. - Base pay for public servants is low but supplemented by allowances, noncash benefits, and a defined-benefit pension scheme. - Tools available (most requiring Cabinet approval): secondments, staff on individual contracts, specialized cadre, special incentives, override of rotation policy (five years). - Flexibility should be targeted to specific positions; approval of professional staff’s salary levels by the Public Service Commission recommended. - Financial and technical resources: - Need specialized IT and information services; current IT infrastructure is fragmented. - Example: CBSL currently has a Bloomberg terminal to support the domestic financing program. - New DMO should develop/acquire a fully integrated IT solution (see Section V). ### Consolidation, institutional roles, and transitional arrangements - Consolidation would combine functions from the PDD of the CBSL, ERD and TOD of the MoF, and introduce new functions. - LankaSecure should remain in the CBSL; DMOs typically do not house central securities depositories or settlement systems. - CBSL should continue to provide banking services for debt-related payments and receipts in local and foreign currencies. - TOD would continue as cash manager; DMO would conduct market transactions required to smooth cash balances (e.g., issuing Treasury bills). - DMO should manage guarantees and on-lending. ### Structural options for organizing borrowing functions - Option: expand ERD into Public Debt Management Office (“One Department” option). This would centralize all central government borrowing but add non-financing development functions (donor/stakeholder coordination). - Note: in 2022, the ERD organized 190 missions for the World Bank and Asian Development Bank, which included organizing 230 meetings. - Alternative: form smaller ERD and move debt and policy and capital markets divisions to the DMO (“Two Departments” option). - Advantage: DMO focused exclusively on financing central government; ERD retains Director General focused on official sector relationships. - Challenge: smaller ERD would lack a back office and need coordination across departments and with DMO front office. - Mission recommends the “Two Departments” option, noting: - public debt stock projected to remain close to 100 percent of GDP over the medium term, even after the debt restructuring; - DMO responsibilities include: (1) conduct domestic auctions, (2) develop the MTDS, (3) manage guarantees and on-lending, (4) maintain consolidated and accurate debt records and timely reporting. ### Front office functions and implementation - Responsibilities: - Oversight of central government borrowing from all sources: international bonds and loans, financial terms of official sector loans, and all domestic securities and loans. - Support development of annual borrowing plan and efficient financing of government; analyze all-in costs and relative merits of each financing source. - Specific moves: - International bonds and syndicated loans (currently ERD’s Capital Markets Division) to be moved to DMO front office. - Responsibility for negotiating/selecting financial terms and conditions of official sector loans to be led by DMO front office (officer from front office to accompany ERD officers in negotiations). - Most significant change: shift responsibility for all domestic borrowing from CBSL to MoF. - Transitional support options for domestic borrowing execution: - Option A: front office of CBSL’s PDD acts as agent for DMO for a transitional period to execute auctions and related activities. Relationship documented by an agency agreement specifying roles and DMO as principal with decision-making rights. Front office of DMO should appoint two or three staff to work closely with CBSL and market participants to build skills. - Option B: transfer function when DMO is formed; require secondments from CBSL and possibly hiring private sector staff or consultants for a transitional period. - Transition length: likely to be at least two years; in some countries the agency role has continued for many years. - Primary dealer (PD) agreements: - PD agreements to be between government (through DMO) and each dealer; under option 1 PD agreement would specify CBSL’s role in implementing domestic borrowing program, including day-to-day relationship with PDs. - CBSL would continue to regulate and supervise primary dealers as financial institutions. - Market and liquidity roles: - DMO to develop measures to improve domestic debt market functioning; coordination required across MoF, CBSL, regulators, market participants, and infrastructure providers. - DMO becomes main decision maker in primary market and will influence secondary market liquidity; continued coordination with CBSL required. - Overdrafts with state-owned commercial banks: - If overdrafts remain, DMO responsible for negotiating terms (maximum size, applicable interest rates). - TOD, as cash manager, retains flexibility to draw on overdrafts. - Mission recommends DMO plan borrowing to maintain positive cash balances (e.g., issuing T-bills). - Issuance planning and investor relations: - Front office to lead development of the ABP and quarterly (or monthly) auction calendars; liaise with TOD, middle office, and CBSL. - Front office to conduct investor and stakeholder relations, including relationships with rating agencies. - Institute of International Finance (IIF) tool could provide a template to assess and improve investor relations and data dissemination practice. - Guarantees issuance process (front office responsible for issuance of government guarantees): - Front office conducts initial compliance check and forwards SOE's guarantee request to middle office for analysis and risk assessment. - Front office evaluates bank agreement, presents middle office opinion to ST recommending approval, who forwards to Cabinet for decision. - After Cabinet approval, front office prepares contracts for signature by DST and ST, transmits signed contract to relevant bank, and forwards documents for registration into DMIS to the back office. - These functions currently performed by TOD and would be transferred to DMO. ### Middle office functions - Lead development of MTDS and oversee risk management: - No current entity in Sri Lanka develops a comprehensive MTDS; middle office would fill this gap. - MTDS focus: medium-term horizon; results presented to DMCC; costs and risks of alternative financing strategies assessed. - Head of DMO selects strategy to propose to Cabinet of Ministers at a meeting chaired by the Minister of Finance. - A debt management strategy document discussing chosen strategy should be prepared for Cabinet submission and published, preferably together with the MTFF. - Budget financing assumption should be consistent with debt management strategy. - Middle office should develop annual timetable for MTDS synchronized with MTFF; staff training on MTDS development recommended (including online learning). - Operational risk management: - Middle office to lead development and implementation of an operational risk management framework covering fraud, human error, noncompliance, reputational threats, third-party failure, cybersecurity, and premises access. - Current MoF IT backup procedures fall short of a comprehensive operational risk framework. - Strong DMOs typically adopt frameworks following guidance from entities such as the Bank for International Settlements. - CBSL informed mission it has procedures for comprehensive management of operational risks. - Compliance function: - Middle office to perform compliance monitoring: MTDS, risk limits, operational risk policies, code of conduct, contractual and statutory obligations. - Debt service forecasting: - Middle office responsible for forecasting interest and exchange rates and debt service projections on new debt for MTDS development (function currently undertaken by TOD and CBSL). - Contingent liabilities: - Middle office to assess risk levels of guarantees and on-lending; develop quantitative risk indicators and risk models; analyze financial capacity of recipients against risk indicators and limits (see Section VI). ### Back office functions and operations - Back office responsibilities: - Settling transactions and maintaining financial records. - Expand ERD Debt Management Division to include domestic debt functions currently in CBSL PDD back office. - ERD Debt Management Division has experience settling and recording debt instruments and issuing payment instructions; may require secondments from CBSL for specialized functions (issuing SLDB certificates, managing unclaimed government securities accounts). - Domestic debt management operations of TOD to be transferred to expanded DMO back office. - Main activities of the back office: - Confirming and settling all loans and securities transactions. - Entering all loans and transactions into the debt recording system(s). - Entering debt transactions into the financial management system (responsibility transferred from the TOD). - Issuing payment instructions for all debt instruments. - Validating and reconciling data and transactions. - Maintaining the debt recording system, including recording of guarantees and on-lending, and updating exchange and interest rates. *Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024102-print-pdf.pdf* ### 73. The mission recommends that the DMO back office takes the lead in debt ### The mission recommends that the DMO back office takes the lead in debt ### Back office responsibilities and organizational consolidation - The DMO back office should take the lead in debt reporting and provision of information, consolidating functions currently split between ERD Debt Management Division, PDD middle office, and PDD back office to eliminate duplication. - Coordination required across the DMO: middle office to contribute risk indicators; front office to contribute market conditions; investor relations activity will increase coordination needs. - Back office responsibilities: - Provision and maintenance of specialized IT systems (DMIS) for all debt, including domestic and external. - Settlement, recording, and issuance of payment instructions for all instruments. - Responsibility for reporting and specialized IT platforms. - Record guarantees and on-lending in the DMIS, enter data provided by the front office, perform necessary controls and verification, and record disbursement and debt service transactions of guarantees and on-lending. - Make payments when guarantees/on-lending recipients cannot fulfill debt service payments, record and monitor collections due from on-lending, and recover amounts from nonperforming sub-borrowers. - Report outstanding balance and flows of guarantees and on-lending in addition to central government debt. - Functions currently performed by TOD would be transferred to the new DMO. ### IT systems, DMIS upgrade, and operational risk - Current systems: - CS-DRMS (ERD Debt Management Division) for official borrowing and international bonds. - CBSL PDD uses Excel and Access databases for domestic debt recording. - Planned upgrades: - Process underway to replace CS-DRMS with Meridian or DMFAS; intention to consolidate all debt (including domestic) in the new DMIS, improve IT infrastructure and security, and develop an interface with financial management systems (Section V). - Expected benefits: - Improved efficiency and reduced operational risk through fewer manual processes and less repeated data entry. - DMIS should ensure data integrity, quality, interfacing with other financial management systems, assigned access controls, authorization for editing records, audit trails, documented procedures, safe data storage, and backups. ### Managing contingent liabilities - Back office to track government guarantees and on-lending by entering data into the DMIS from front office documents, performing controls, verifying, and recording transactions. - Back office to handle payments when recipients fail to meet debt service, monitor collections, and pursue recovery from nonperforming sub-borrowers. - Reporting obligations include both outstanding balances and flows of guarantees and on-lending. ### Other support functions - Internal audit: could be covered by the Internal Audit Division of the MoF. - Legal advice: to be provided by the MoF’s Legal Affairs Department and the Attorney General’s Department (current practice); mission informed sufficient expertise exists for domestic and international borrowing. - Organizational support: Human resources, general IT, resource management, and general administration to be provided as for other MoF departments. ### Advisory committee - Advisory committees commonly comprise experienced individuals covering public debt management, finance, reporting, financial markets, and operational risk. - Typical roles: - Provide opinions on the DMO’s proposed strategy. - Provide opinions on strategic initiatives (new instruments, enhanced outreach). - Provide quality assurance on DMO performance, integrity of processes, follow-up on audit recommendations, and management of operational risk. - The mission supports establishing a DMO advisory committee in Sri Lanka, subject to conflict-of-interest checks and confidentiality agreements. - Potential composition examples: recently retired senior bankers or investors, finance academics, senior staff of other countries’ DMOs (private capacity), senior accounting firm staff, consultants active in PDM, governance professionals, recently retired senior MoF or central bank staff. ### Coordination across agencies and establishment of DMCC - Debt management objectives require coordination with fiscal and monetary authorities; coordination should include Fiscal Policy, National Budget, Treasury Operations, External Resources, and Public Enterprises (MoF), and Domestic Operations, International Operations, and Economic Research (CBSL). - Operational-level coordination with CBSL Domestic Operations and International Operations is required as government cash flows influence banking liquidity and reserves; TOD (government cash manager) is a crucial participant. - Recommendation: establish a Debt Management Coordinating Committee (DMCC) chaired by the Director General of the DMO and comprising representatives of the CBSL, TOD, ERD, and Department of Fiscal Policy, plus managers of front, middle, and back offices. - DMCC functions could include: - Review the debt management strategy prepared by the middle office. - Review the annual borrowing plan and auction calendar. - Coordinate with cash management, sharing debt service forecasts, new borrowing, cashflow forecasts and financing needs, and treasury single account balances. - Evaluate domestic and international market conditions, and money market liquidity. - Discuss risks of government debt and market opportunities and official sources. ### Institutional arrangements, Tender Board, and auction decisions - Tender Board to be abolished; domestic debt market operations to be controlled by the DMO. - DMO should decide on auction results (even if CBSL PDD acts as agent), using ABP, auction calendar, cashflow needs, bid volume and dispersion, macro developments, domestic money market developments, and primary and secondary market yield trends. - DMO to determine issuance volume and act as a price taker, allowing the market to determine yields. ### Transitional issues and sequencing - Major change: transfer domestic debt operations from CBSL to DMO in MoF; timeframe and sequencing to be based on practical considerations. - Possible early moves: PDD’s back and middle office functions could transfer earlier due to ERD Debt Management Division’s transaction processing and reporting experience. - Secondment: may be necessary to second staff from PDD back office initially to build domestic borrowing expertise. - Detailed planning required to redesign processes linking PDD front office (if agent) to DMO back office, and DMO back office links to LankaSecure. - Reporting: detailed analysis needed on transferring PDD’s current functions and eliminating duplication (Section V). - Process redesign opportunity: review all transaction processing, recording, and reporting; eliminate PDD back office and transfer some TOD functions to DMO to improve efficiency, remove duplication, and reduce operational risk. - Engagement of a consulting firm (for example, one of the Big 4 with Sri Lanka branches) with Treasury process expertise recommended to assess processes and make recommendations (business process reengineering).26 ### Summary of recommendations (short-term and medium-term) - Short-Term Measures: - Establish the DMO as a department in the MoF by consolidating debt management functions of ERD, TOD, and PDD, except: - Operations of LankaSecure to remain in the CBSL. - Cash management to remain with the TOD. - Structure DMO along functional lines: - Front office: responsibility/oversight of central government borrowing from all sources, guarantees and on-lending; domestic market borrowing may be delegated to CBSL temporarily; front office develops ABP and manages investor relations. - Middle office: prepares debt management strategy, analyzes and manages risk, and undertakes compliance and debt servicing forecasting. - Back office: settles, records, issues payment instructions, responsible for reporting and specialized IT platforms. - Support establishment of advisory committee to aid senior management oversight. - Establish a coordinating committee chaired by DMO head with membership from TOD, ERD, Department of Fiscal Policy (MoF), and CBSL Domestic Operations, International Operations, and Economic Research departments. - Abolish the Tender Board and DDMC. - DMO to develop a MTDS in consultation with Fiscal Policy, Budget, ERD, TOD, and CBSL, and prepare annual timeline including DMCC submission. - Training: online MTDS training for all middle office staff; ABP training for front office staff; other training on yield curve, forward curve, and interest rate parity. - Medium-Term Measures: - Transfer domestic auction program responsibilities from the CBSL. - Conduct business process reengineering to improve efficiency, eliminate duplication, and reduce operational risk. - Conduct MTDS analysis using the MTDS analytical tool. - Prepare and publish a rolling annual debt management strategy consistent with the MTFF. - Publish the debt management strategy together with the budget. - Publish the ABP and auction calendar. ### Debt transparency: sound practices and current situation - Sound practice highlights: - Regular publication (monthly or quarterly) of outstanding stock and composition of debt and financial assets, and loan guarantees and other contingent liabilities, including currency denomination, maturity, and interest rate structure.27 - Transparent planning and borrowing practices, well-defined debt recording, periodic monitoring and evaluation, and a strong legal and regulatory framework for information sharing (for example, SOEs with DMO, DMO with parliamentary and auditing bodies). - DMO responsibility for updated debt data covering central government domestic and external debt instruments, sovereign guaranteed debt, and on-lending; SOEs and sub-national government nonguaranteed debt should be available for comprehensive NFPS reporting.28 - DMIS should permit interfacing with other government financial management systems, protect data via access controls and audit trails, and enable easy data extraction for monitoring, strategy development, and reporting. - Debt reports should cover transactions in the reference period and their alignment with MTDS and ABP; publication of domestic placement plans and results should be timely and standardized, including auctioned securities, auction calendar, results, and secondary market disclosure.30 - Timely and comprehensive publication of international sovereign bond issuance information is critical. - Current situation: - Wide range of central government debt is disclosed, but timeliness, coverage, and consolidation could be improved; fragmentation between MoF and CBSL causes duplication in recording and reporting. - Debt recording is fragmented with duplicated databases: - ERD records central government external borrowing comprehensively in CS-DRMS (Commonwealth Secretariat). - PDD’s middle office records SLDBs in its own Excel-based database for reporting; PDD back office maintains a register of SLDB holdings for debt servicing. - PDD back office has Access database to facilitate SLDB issuances, print physical certificates, and generate interest payment reports. - Domestic government securities records (T-bills and T-bonds) are kept at the Central Depository System (CDS) hosted under PDD (LankaSecure); PDD middle office maintains separate databases for domestic and external instruments for reporting and analysis; PDD back office manages its own database per instrument type to support debt service reporting.31 - TOD records/accounting of new borrowing and debt service payments in the Treasury Financial Management System, which is not integrated with CS-DRMS; TOD maintains an internal Excel database and coordinates domestic debt payments with PDD back office. *Source: tarea2024102-print-pdf - 73. The mission recommends that the DMO back office takes the lead in debt* ### 94. The PDD and ERD have a well-established two-step process for debt recording ### 94. The PDD and ERD have a well-established two-step process for debt recording ### Debt recording process and organizational roles - PDD and ERD operate a well-defined coordinated work process with a two-step process for debt recording. - The PDD has an updated and comprehensive procedures manual. - ERD performs activities following checklist-format internal instructions. - PDD back office: - Main functions related to settlement of T-bill and T-bond issuances (in coordination with the PDD front office) and payments of domestic and external debt (in coordination with LankaSecure and the TOD in the MoF). - Responsible for recording only debt service payments. - PDD middle office: - Central role in managing debt databases for analysis. - Has limited risk analysis in place. ### CS-DRMS and debt recording system status - CS-DRMS has been used in Sri Lanka since 1986; the current version is outdated and has important limitations. - Authorities report CS-DRMS limitations: - Limited capacity to record domestic securities. - Limited reporting features. - The existing license of the system expired in June 2022. - ERD can still use the system, but the vendor does not provide further maintenance or improvements, posing a significant operational risk. - MoF/ERD is assessing options: - Upgrade of CS-DRMS to Meridian (a more modern system provided by the same vendor) versus acquiring the license of DMFAS, provided by UNCTAD. ### Domestic securities clearing, settlement, and depository functions - LankaSettle System administers domestic securities clearing, settlement, and depository functions (system developed by an external vendor in 2004). - CBSL IT department and the vendor support maintenance and improvements. - The system is unsophisticated and is missing key functionalities (for example, related to trading). - The CDS maintains the registry of scripless T-bills and T-bonds at the investor level; the number of accounts has steadily increased. - Scripless Securities Settlement System (SSSS) facilitates settlement of government securities transactions on a delivery versus payment (DvP) basis or delivery free (DvF) basis, resulting in ownership changing. - Transfer of funds associated with DvP transactions is facilitated by Real-Time Gross Settlement System (RTGS). - Note: A Term of Reference to develop a new system was drafted, but currently there is no budget for this project. ### Debt data completeness, timeliness, and audit observations - Debt data are mostly complete and recorded on a timely basis; however, the National Audit Office identified areas for improvement. - Recording timeliness: - New loans and securities are recorded within a month of origination. - Disbursements of existing external debt by some lenders are often recorded with a time lag of up to six months. - National Audit Office Special Audit Report on Financial Management and Public Debt Control in Sri Lanka 2018-2022 observations: - Inconsistencies between external debt stock registered in CS-DRMS and the government financial statements. - Public enterprise debt is being serviced by the government through the budget but is not registered as government direct debt. - Clearer definitions of public debt management responsibilities and the concept of public debt are needed. ### Debt reporting coverage and publications - Information about central government debt and guaranteed debt is published in several MoF and CBSL reports and bulletins. - The PDD’s Public Debt Management in Sri Lanka report: - Could be considered Sri Lanka’s annual debt report. - Normally published more than six months after the end of the base year. - 2022 report is the only publication presenting a thorough discussion on implementation of the 2019–23 MTDS and detailed description of the evolving domestic and external environment in 2021; implications for domestic T-bill and T-bond issuances. - Scope: central government debt only; does not cover sovereign guarantees or NFPS debt. - MoF began publishing a quarterly debt bulletin in 2022 (commitment under IMF-supported program): - First edition discloses data as of September 2022. - Includes outstanding total public debt (including guaranteed debt and CBSL debt) broken down by currency, instrument, and creditors (for external loans). - Presents a list of outstanding Treasury guarantees with beneficiaries, amounts, and issuance and expiration dates. - Information on the debt maturity profile is not included. ### World Bank Debt Reporting Heatmap assessment highlights - Data accessibility: debt data are available but scattered among multiple reports on MoF’s and CBSL’s websites. - Instrument coverage: domestic, external, and guaranteed debt data are published. - Sectoral coverage: CBSL annual report discloses debt data of the central government and SOEs (guaranteed and nonguaranteed foreign project loans). - Information on recently contracted external loans: MoF’s annual report includes detailed information on terms and conditions of new loans and disbursements in the reference year. - Periodicity: - MoF started publishing a simplified quarterly debt bulletin. - Large portion of debt data is only published annually. - Time lag: most published debt reports and data are disclosed three or more months following the end of the reference period. - Debt management strategy: latest published debt management strategy is for 2019. - Annual borrowing plan: there is no published ABP. - Contingent liabilities: CBSL’s and MoF’s reports/bulletins include data on guarantees to SOEs; no fiscal risk statement or information about other contingent liabilities is published. - Mission understanding: projects executed by subnational government are financed through central government‘s budget support, and therefore there is no debt at the local level. ### Domestic debt market operations and transparency - Domestic debt management led by CBSL’s PDD generally follows high standards of transparency and relies on market-based practices and instruments. - T-bills maturities: 91-, 182-, and 364-days. - T-bonds maturities: ranging from two to 30 years; issued through weekly and fortnightly auctions, respectively. - PDD publishes auction announcements and results, and a quarterly auction calendar, on the CBSL website. - Auctions are organized in a phased structure with defined roles for primary dealers (PDs). - SLDBs are issued infrequently under a different competitive arrangement (securities issued in script format). - PDD meets market participants at least monthly in pre-bid meetings. - Direct placements: - PDD can undertake direct bilateral placements to PDs, subject to Monetary Board approval. - Direct issuances to the CBSL are also made; in neither case is a press release published. - Aggregation issue: government financing and monetary policy operations are conducted by different departments and offered on different days, but aggregate data are combined in publications, making amounts indistinguishable and reducing transparency. ### World Bank Domestic Debt Securities Heatmap assessment highlights - Use of domestic debt issued through auctions: mission understands that more than 80 percent of domestic debt issuances are placed through auctions. - Publication of the issuance calendar: - A bimonthly domestic auction calendar is published on the CBSL website. - Auction announcements are published no later than three working days before issuance. - Indicative amounts for T-bonds (but not T-bills) are included in the calendar. - Implementation of the issuance calendar: - Less than 5 percent of auctions were canceled in the past year; however, large amounts were underwritten by the CBSL. - Publication of auction results: - Auction results are published on the same day as the offer, but more than an hour after the auction closing. - Note: Auctions close at 11 a.m. and results are published from 2 p.m. onward, after the deliberation of the Tender Board Committee. - Post-trade transparency: - CBSL collects and publishes daily information on secondary market quotes, and a resulting theoretical yield curve, on its website (https://www.cbsl.gov.lk/pd-daily-report). ### Issues identified - Current CS-DRMS license expiry (June 2022) exposes ERD to elevated operational risk; vendor will no longer provide required maintenance. - Multiple and overlapping databases across MoF and CBSL add operational risk and inefficiencies. - Missing functionalities in LankaSettle and lack of budget for a new system development. - Inconsistencies between CS-DRMS records and government financial statements; omission of public enterprise debt from government direct debt records. - No published Annual Borrowing Plan (ABP) and no updated debt management strategy since 2019. - Large portion of published debt data subject to publication lags of three or more months. ### Policy recommendations and actions (Issues and Recommendations) - Urgent decision to acquire a new debt recording system: - Purchase of a license from the Commonwealth Secretariat to use Meridian or from UNCTAD to use the latest version of DMFAS should not wait for the new DMO to be established. - Consolidate all central government debt data currently recorded across scattered databases at the MoF and CBSL into the new debt recording system. - New database should include government-guaranteed debt, on-lending, and domestic government securities data. - LankaSecure should continue recording T-bill and T-bond debt data at the level of individual investor accounts (under its CDS). - LankaSettle should continue operating as Sri Lanka Settlement and Depository architecture. - Development/purchase of a more modern system to provide currently missing functions should be pursued as soon as resources are available. - Review multiple domestic and external debt databases maintained by CBSL and MoF. - New debt recording system should allow recorded data to be used for different purposes. - Review and properly formalize debt recording processes in procedures manuals to reduce duplication. - Integration with the Treasury Financial Management System is advisable. - Address audit recommendations related to failures on debt records following a predefined action plan. - A new debt recording system and improved processes will help address reported inconsistencies and prevent future National Audit Office observations. - Establish a working group to review all published debt reports and data to eliminate unnecessary duplication, ensure consistency, and reduce publication lags. - Initial steps: define reporting functions at the new DMO, followed by development of revised reports and reorganization of MoF’s and CBSL’s websites as needed. - Medium term: consider creating an investor relations area on one or both websites. - Publish a revised MTDS and an ABP on the MoF’s and CBSL’s websites. - Resume publication of quarterly auction calendars as soon as conditions permit; consider publication of indicative volumes for T-bill auctions over time when cash management practices have been strengthened. - Once auction decision-making process is reviewed and the new DMO is established, publish auction results within an hour of auction closing to enhance transparency and allow investors to adjust positions. ### Summary of Recommendations Short-Term Measures - Choose a new debt recording system and acquire the license. - Include all debt-related data in the new debt recording system (including domestic securities and guaranteed debt). - Review all existing databases at the MoF and CBSL and replace them to the extent possible so that data are available for different purposes in the new debt recording system. - Consider using a predefined action plan to address audit recommendations on debt recording included in the Special Audit Report on Financial Management and Public Debt Control in Sri Lanka 2018-2022. Medium-Term Measures - Establish a working group/taskforce to review the information in published debt reports, aiming to reduce duplication, improve timeliness, and eliminate inconsistencies. - Develop and publish a MTDS and ABP (Section IV). - Resume the publication of quarterly auction calendars (once conditions permit) and potentially include indicative amounts for T-bills. - Shorten the time lag for publishing auction results to up to one hour. - The development of business continuity and disaster recovery plans are critical for debt recording; however, these should be addressed by the new DMO. *Source: IMF staff report content provided in the supplied PDF chapter/section.* ### 118. Regular reporting and strong transparency and accountability mechanisms are ### 118. Regular reporting and strong transparency and accountability mechanisms are ### Current Situation - Guaranteed loans and on-lending are used interchangeably by the government to provide financial resources to SOEs. Guarantees may also be employed to infuse capital into a SOE because of its deteriorated financial performance. - The decision to guarantee or on-lend is determined by the lender's preference as to whether the borrower should be the government or not, rather than the beneficiary's ability to pay. - CBSL and MoF reports include data on guaranteed debt with different details, but there are no publicly available data on the outstanding balance of on-lent loans. - Government loan guarantees are disclosed in the financial statement of the central government, annual and quarterly reports of the MoF, and annual reports of the CBSL. - The Fiscal Management Responsibility Act of 2003 imposes limits on the stock of debt guarantees; no limit has been set on on-lending. In November 2021, Parliament increased the guarantee limit to 15 percent of GDP from 10 percent of GDP. The guarantee limit is only for loan guarantees and does not cover other types of State guarantees such as through public-private partnerships. - The President is the authorized body for signing guaranteed external loan agreements under the Foreign Loans Act 29 of 1957; this authority is delegated to senior Treasury officials on a transaction basis. - The TOD is the principal entity responsible for issuance of loan guarantees and on-lending, in coordination with the PED and ERD, but there is no legal or regulatory framework defining the TOD’s roles and responsibilities. - PED’s main role is assessment of guarantee requests considering limits and the financial capacity of SOEs; ERD is involved for external financing and decides whether loans will be guaranteed or taken in the name of the central government to be on-lent. - On-lending is extended when SOEs have weak borrowing capacity; decision to on-lend is frequently made during loan negotiations and terms are usually identical to the primary loan agreement unless the sub-borrower’s financial position warrants modification. - Final decision to issue a guarantee and to on-lend is made by the Cabinet of Ministers after receiving opinion and recommendation from the MoF and relevant Treasury departments. - MoF and PED assessments are limited: PED assesses cashflows and financial tables rather than creditworthiness and probability of default. On-lending decisions are made based on lender conditionalities, not sub-borrower ability to repay. - Process flow (as described in source) for guarantee issuance includes SOE request → line ministry → Cabinet → MoF analysis → certified bank agreement → Treasury recommendation → Cabinet decision → MoF (TOD) prepares TG/LC → signatures → original TG/LC to bank → MoF (TOD) updates records. - MoF recommendations against issuance of a guarantee are not binding; Cabinet has approved guarantees despite negative MoF assessment based on “national interest” and has approved guarantees exceeding FMR Act limits. - The government does not charge fees to recipients of guarantees or sub-borrowers of on-lent funds. No other risk mitigation tools (partial guarantees, spreads on-lent loans, contingency accounts, collateral) exist. - No documented procedures for oversight of guarantees. TOD records transactions in an Excel spreadsheet and monitors outstanding balance; called guarantee payments made by TOD. For on-lending, sub-borrower expected to pay loan into consolidated fund; TOD monitors risk of nonrepayment and communicates nonpayment to PED for follow-up. ### Issues and Recommendations - Priority: establish a robust guarantee and on-lending management policy backed by a strong legal, institutional, and operational framework given large stock outstanding of guaranteed debt. - Framework should include: - clear definition of authority to issue guarantees and on-lending and objectives, roles, responsibilities of related entities; - governance of process framework including: (1) eligibility criteria for applicants; (2) checking compliance with existing regulations; (3) risk assessment protocols and quantitative risk limits of guarantees and on-lending; (4) risk mitigation tools and strategies, including determination of the limit considering sustainability of public debt; (5) recording, monitoring, and reporting requirements; and (6) calling and recovery procedures. - Develop a credit risk analysis and management approach: perform credit risk analysis focused on borrower’s capacity to repay before each guarantee’s issue; discontinue practice of issuing government guarantees to nonperforming borrowers. - Identify and integrate risk mitigation tools into guarantee and on-lending framework: - Introduce guarantee fees calculated based on actual credit outstanding or issuance amount according to credit risk of issuing entity; fee can be collected as a one-time payment when guarantee is signed. - Collected fees could be deposited into a contingency fund to hedge against default risks. - Develop a policy for on-lending: - Base on institutional requirement and/or credit risk assessment. - Restrict on-lending to public entities needing subsidy or cases of “national interests”. - If risk assessment unfavorable but request must be satisfied, consider on-lending at subsidized rates; however, direct budget subsidy may be more appropriate, less expensive, and less administratively cumbersome than on-lending. - Using subsidies or transfers instead of guarantees or on-lending would enhance budgetary transparency and facilitate fiscal impact assessment and comparison with other expenditure priorities. - Clarify roles of line ministries. - Establish clear and enforceable procedures for recording, monitoring, reporting, calling and recovery of guarantees: - Timely and reliable recording in a modern, centralized DMIS improves reporting and monitoring capacity of the DMO and enables servicing liabilities when needed. - Operations manual should specify responsibility for recording liabilities, verification procedures, stages of control, monitoring, reporting, inspection processes. - Reporting should align with international standards. - Establish mechanism to provide DMO advance warning of issues that may result in guarantees being called; require recipients to report regularly on financial capacity and likelihood of making next debt payment. ### Summary of Recommendations Short-Term Measures - Develop a legal, institutional, and operational framework for the management of government guarantees and on-lending. - Transfer all TOD guarantee-related functions to the DMO. Medium-Term Measures - Develop quantitative risk limits and introduce guarantee fees as a risk mitigation instrument. - Develop an on-lending policy. - Disclose expected losses based on associated credit risks and probabilities of default. ### ANNEX I. PROPOSED DRAFT DEBT MANAGEMENT REFORM ACTION PLAN (selected items relevant to guarantees and on-lending) - Action 1–6: Draft, consult, submit, and seek approval for a PDM Act to supersede relevant debt-related legislation, include international sound practices, and establish a single debt management office at the MoF (timelines include Mar-23 to Nov-23). - Action 7–11: Formally establish the DMO as a department of the MoF, transfer responsibilities from CBSL/TOD/ERD to DMO, sign an agency agreement with CBSL, issue DDMC and Advisory Committee regulations, and appoint specialized DMO staff (timelines include Mar-23 to Jun-24). - Action 16–21: Decide on and acquire a debt recording system license, include all debt-related data (including domestic securities and guaranteed debt) in the new system, review and replace existing databases, address audit recommendations related to debt recording, establish a working group to review published debt reports, and resume publication of quarterly auction calendars with shorter auction-results lag (selected timelines include Mar-23 to Jan-24). - Action 22: Develop a legal, institutional, and operational framework for management of government guarantees and on-lending (Mar-23 to Dec-24). Expected outputs: PDM Act, secondary legislation, regulations and procedures manual with roles and responsibilities. - Action 23: Transfer TOD’s guarantee-related functions to the DMO (Jan-24 to Jun-24). Expected output: establishment of DMO’s responsibilities on management of guarantees and on-lending and related documents. - Action 24: Develop quantitative risk limits and introduce guarantee fees as a risk mitigation instrument (Jan-25 to Dec-25). Expected output: internal procedures and/or regulation defining the approach. *Source: tarea2024102-print-pdf - 118. Regular reporting and strong transparency and accountability mechanisms are (excerpts).* ### introduction of ### introduction of ### Risk management and mitigation tools; TA support - WB/IMF TA to support Improved risk analysis capacity and management of contingent liabilities ### Increased debt and fiscal transparency — On-lending policy - Action 25. Develop an on-lending policy - Initiate: Jan-25 - Deadline: Dec-25 - Lead Entity (and Other Units Involved): MoF (DMO, ERD, TOD, PED, Fiscal Policy, Budget) - Expected Outputs of the Actions: - Legislation/regulation defining on-lending policy (e.g., eligibility, conditions, appropriate use, etc.) - Budget (for External Assistance): WB/IMF TA to support - Expected Outcome of the Project Components: - Improved risk analysis capacity and management of contingent liabilities ### Increased debt and fiscal transparency — Quantify and disclose guarantees and on-lending associated risks - Action 26. Disclose expected losses based on associated credit risks and probabilities of default - Initiate: Jan-26 - Deadline: Dec-26 - Lead Entity (and Other Units Involved): MoF (DMO, ERD, TOD, PED, Fiscal Policy, Budget) - Expected Outputs of the Actions: - Methodology to quantify risks and publication of potential losses - Budget (for External Assistance): WB/IMF TA to support - Expected Outcome of the Project Components: - Improved risk analysis capacity and management of contingent liabilities ### Annex II. Government officials met — Ministry of Finance - 01 R.M.P Rathnayake — Deputy Secretary to the Treasury - 02 A.K. Senevirarhna — Deputy Secretary to the Treasury - 03 Ajith Abeysekara — Director General External Resources - 04 H.C.D.L.Silva — Director General Treasury Operations - 05 P.A.S. Athula Kumara — Director General Public Enterprises - 06 K.A.Vimalenthirarajah — Director General Trade and Investment Policies - 07 Udeni Udugahapattuwa — Additional Director General External Resources - 08 Visakha Amarasekara — Additional Director General External Resources - 09 A.K.D.D.D. Arandara — Additional Director General Legal Affairs - 10 Damitha Rathnayake — Additional Director General Treasury Operations - 11 W.D.R. Krishantha — Director External Resources - 12 Sajeewani Dayaratne — Director Treasury Operations - 13 Hemantha Pubudusiri — Director External Resources - 14 Ranga Nishantha — Director External Resources - 15 Prabhash D. Jayalath — Director External Resources - 16 Samantha Bandara — Director External Resources - 17 P.P.S.R. De Silva — Director External Resources - 18 A.R. Wickramasinghe — Director Public Enterprises - 19 Gayani Kariyawasam — Director Treasury Operations - 20 R.A.L. Udaya Kumara — Director Public Enterprises - 21 Himali Bogadagedara — Director (Acting) External Resources - 22 Jayanie Wickrama Arachchi — Director (Acting) Fiscal Policy - 23 K.Sudarshana De Silva — Director (Acting) National Budget - 24 G. Ranjith — Deputy Director External Resources - 25 Tharindu Kariyawasam — Deputy Director External Resources - 26 Uditha Fernando — Deputy Director External Resources - 27 Sewwandi Amarasekara — Deputy Director External Resources - 28 K.A.C. Priyadarshani — Deputy Director Public Enterprises - 29 Erandi Udagama — Deputy Director Public Enterprises - 30 Chandrika Senanayake — Deputy Director External Resources - 31 Anupama Monorathna — Deputy Director External Resources - 32 Upendra Wijerathna — Deputy Director External Resources - 33 Ajith C. Kumara — Deputy Director External Resources - 34 Thisitha Narasinghe — Deputy Director External Resources - 35 Kumuduni Chandrasekara — Deputy Director External Resources - 36 Sachith Fernando — Deputy Director External Resources ### Annex II. Government officials met — Ministry of Public Administration, Home Affairs, Provincial Councils, and Local Government - 01 P.G.D. Pradeepa Serasinghe — Additional Secretary Human Resources Development - 02 K.D.N. Ranjith Ashoka — Additional Secretary Public Administration - 03 R. Vijayalechumi — Additional Secretary Reforms - 04 W.M.A. Wijekoon — Additional Secretary Languages - 05 P.W. Rajapaksha — Additional Secretary Project Monitoring - Local Government - 06 A. Jagath D. Dias — Director General Pensions - 07 M.N. Gammanpila — Additional Secretary Internal Administration - 08 Waruna Sri Danapala — Additional Secretary Regional Administration Reforms - 09 M. Kodippiliarachchi — Additional Secretary Local Government and Provincial Councils - 10 S. Alokabandara — Director General Combined Services - 11 H.A.C. Kumarasinghe — Director General Establishment - 12 A.H.M.K.K.A. Herath — Chief Financial Officer - 13 Prince Senadeera — Commissioner General Official Languages - 14 A.V. Janadara — Additional Director General SLIDA - 15 G.L. Sajeewani Perera — Senior Assistant Human Resources Development - 16 P.E.M.D.K. Palipana — Legal Officer Public Administration - 17 S. Palliyaguru — Legal Officer Home Affairs - 18 Gayani Premathilaka — Legal Officer Provincial Councils and Local Government *Source: tarea2024102-print-pdf - introduction of* --- _Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024102-print-pdf.pdf_