President bans direct deals between state bodies and foreign agencies

Government ministers and state institutions, including Provincial Councils, have been banned from entering into direct agreements or memoranda of understanding with foreign investors, lending agencies, international non-governmental organisations and embassies.

The ban was imposed by the President’s office with immediate effect.

All concerned have been directed to follow “due process” in entering into such agreements or MoUs. This include clearance from the Ministry of Foreign Relations, the Finance Ministry, the Attorney General and the Central Bank.

Presidential Secretary P.B. Jayasundara on Thursday sent out a circular to all ministries setting out the criteria of the manner in which agreements should be reached.

He said the directive was being issued as line ministries, provincial councils, government departments, regulatory agencies and semi-government agencies were continuing to engage with foreign investors, lending agencies, foreign organisations and missions to discuss various financing programmes, borrowing arrangements, credit lines and other similar types of instruments. They even proceed beyond by entering into various MoUs and agreements without following due process envisaged in the related governing framework.

“It has also been noted that many such transactions are done without the prior knowledge or concurrence of the ministries associated with external relations, relevant Treasury departments and the Central Bank of Sri Lanka (CBSL),” the circular said.

It noted that many bilateral and multilateral agreements and MoUs entered into in the past were poorly formulated with no proper needs assessment or sufficient preparatory work carried out, leading to multifaceted implementation difficulties, including legal obstacles.

With immediate effect, all ministry secretaries are instructed to refrain from dealing with investment proposals, financing proposals or bilateral or multilateral funding arrangements on public investment projects either in the form of grant aid or foreign loans. “These are the responsibilities of the Ministry of Finance, Economy and Policy Development and the CBSL,”the circular noted.

All investment proposals are to be channel;ed through to the ‘Front Office Desk’ at the Board of Investment (BoI) while the financing proposals should be directed to a similar office at the General Treasury for further processing purposes. Accordingly, the BoI’s Director General will inform the potential investor whether the proposal is acceptable or not, under the new guidelines.

The new circular came weeks before the government begins working on a Vote on Account from January next year until the first Annual Budget is approved by Parliament.

During the previous government, some Cabinet Ministers engaged in direct deals with foreign institutions and international non-Government Organisations (NGOs) without obtaining Cabinet approval. Former Minister Rishard Bathiurdeen was among those who received direct funding.

The dissolved Northern Provincial Council (NPC) too passed relevant statutes to set up the Chief Minister’s Fund to assist the post-war infrastructure development and the war affected communities through assistance from diaspora but it did not materialised. Former Chief Minister C.V. Wigneswaran accused the previous government of deliberately blocking this initiative though he claimed it was functional in other provincial councils.

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