Sri Lanka’s more recent as well as past history records too many occasions in which, willful and knowingly exercised wrongful actions and decision making, whilst in situations with serious conflicts of interests, by holders of office as Presidents, Ministers, etc. says former Chairman of the Ceylon Chamber of Commerce Chandra Jayaratne.

In a letter addressed to the Country Director IMF in Colombo.Mr Jayaratne elaborates on the matter.

The full text of the letter is appended


31st March 2023                            Registered Post


Country Director,

International Monetary Fund,

Sri Lanka Regional Office,

Central Bank Building,

30 Janadhipathi Mawatha,

Colombo 1.


Dear Sir,

Critical State Functions Ignored in the IMF Governance Diagnostics Assessment Framework

The IMF arrangement under the Extended Fund Facility to support economic policies and reforms of Sri Lanka ( a State currently facing a severe socio economic crisis as a result of past policy missteps and economic shocks), in order to assist Sri Lanka to build strong policy measures under five key pillars is duly recognized.  It is warmly appreciated that anti-corruption and governance reforms are a central pillar of the EFF support program.


It is noted that the IMF will be conducting an in-depth governance diagnostic exercise to assess corruption and governance vulnerabilities in Sri Lanka and provide, prioritize, and seek recommendations to minimize corruption and governance vulnerabilities. For this purpose the IMF proposes to use the Enhanced Fund Engagement in Governance framework adopted in 2018; and assess the severity of corruption risks under the six key state functions, (ie. Fiscal Governance, Financial Sector Oversight, Central Bank Governance, Market Regulations, Rule of Law and Money Laundering & Terrorism Financing).


It is regretted that the proposed diagnostics framework appears not to assess the existing governance weaknesses arising from and / or associated with the currently applicable “Core Structural Governance Framework of Sri Lanka”; especially those vulnerabilities arising from and / or associated with the weaknesses embedded in the apex governance framework as defined by the Constitution of Sri Lanka and other key associated statues.


These underscored weaknesses are in relation to

  • the selection/appointment/removal of key officials in Governance, Public Service and Independent Institutions, and their capabilities, integrity, empowerments, objectives and responsibilities, accountability, independence, limitation of conflicts of interests, codes of conduct and penal provisions applicable when in default of good governance commitments
  • the application of democratic governance principles relating to Fundamental Rights, Equity, Equality, Law and Order
  • Independence and Professionalization of Law Enforcement and Judicial Officials
  • Public Services Professionalization and Good Governance Accountability
  • Public Finance and  Audit


Your attention is drawn to the yet unimplemented recommendations set out in the Reports of the Sub-Committees of the Constitutional Assembly dealing with Fundamental Rights, Judiciary, Public Finance, Law and Order, Centre Periphery Relations published in 2016; and other lacunae brought up from time to time, which remain as structural governance weaknesses giving rise to continuing significant corruption and governance vulnerabilities.




Sri Lanka’s more recent as well as past history records too many occasions in which, willful and knowingly exercised wrongful actions and decision making, whilst in situations with serious conflicts of interests, by holders of office as Presidents, Ministers, Secretaries, Independent Institutional Heads and Key Departmental Heads, have been tainted by corruption and governance vulnerabilities; with the consequence of these actions having led to the crystallization of serious socio-economic crises. Regrettably these individuals who have not been investigated effectively, prosecuted, penalized and disbarred from office have in subsequent stints in public office continued to act in a similar manner with tainted corruption and governance vulnerabilities. Such miscreants are truly ‘economic assassins’ as described by John Perkins in “Confessions of an Economic Hit Man” and regrettably they remain at large with significant state governance responsibilities.


An example of, a very significant core structural governance framework weakness with options for corruption and governance vulnerabilities arise from the construction of the empowerments of a Minister, in terms of article 52 (2) of the Constitution. Here a Secretary to a Ministry ( who happens to be the Chief Accounting Officer and is empowered to carry the responsibility and accountability for the management of the resources, both physical and human, entrusted by the State, with the objective of producing desired and set outcomes by taking leadership management action with economy, efficiency and effectiveness sans corruption and waste) is subject to the direction and control of his Minister, in the exercise supervision over the departments of Government and other institutions in charge of the Minister.


Without a priority reform of the above article, along with the cessation of the practice of changing the Secretaries of respective Ministries with every change of Ministers, the core vulnerabilities arising from the lack of due accountability and independence of the chief executive and chief accounting officers (who remain not ring fenced from political pressure, wrongful or personal interests driven directions and control, which are often exercised by Ministers and Superiors by  directing them officially or influencing them  to follow the informal dictates) have led to decisions and enforcement actions tainted by  governance and corruption vulnerabilities.


The recommended reform is for the article 52 (2) to be amended to read as:

“The Secretary to a Ministry, subject to the policy direction of his Minister, shall exercise general administrative control, supervision and oversight over the departments of government other institutions assigned to the Minister as subjects and functions of the Ministry in terms of section 43(2) and 44(2); and will be designated the Chief Accounting Officer of such Ministry and in such capacity will be, answerable, conjointly with the Minister to the Cabinet and Parliament  for the effective discharge of the accountability for the subjects of the accountability for the subjects and functions assigned”  (Refer page 88 of the– Report of the Sub Committees of the Constitutional Assembly).


Concurrently the provisions of the National Audit Act and any other related statutes must also be reformed to allow any Minister, Chief Accounting Officer and “all other persons responsible for the deficiency or loss” to be subjected to surcharge by the Audit Service Commission. Further the said Commission should be entitled not only to impose such surcharges but also be permitted to empower the Auditor General to pursue such steps, including legal action, in the recovery of any deficiency or loss incurred. Such miscreants should be further subjected to other disciplinary action and even be disbarred from holding public service office and be denied remunerations, perks and benefits in the future. It is no surprise that where following the Supreme Court decision stating that a tender process followed “shocks the conscience of the Court”, was followed up by no action against any miscreants.


Further Core Structural Weaknesses in Public Finance and Audit areas which may lead to corruption and governance vulnerabilities can be mitigated by:


  1. Reforming the national budgetary process, by adopting the structure and processes pursued in the five phase New Zealand budgetary processes, along with its accompanying public consultation and effective disclosure arrangement etc. This process must be accompanied by the establishment of professionally competent Parliamentary Budget Office, with strengthened oversight in ensuring financial integrity, accountability, transparency and responsibility in the management of Public Finance by Parliament; alongside appropriately empowered Public Finance Committee, COPE and COPA Committees with enhanced powers for surcharge and prosecution similar to the Audit Services Commission; and in addition by these Committees being chaired by competent opposition members.
  2. Make Fiscal Responsibilities Act and Active Liability Management Act provisions to be subject to strict compliance, accountability and subject to penal provisions for any deviations beyond approved levels; along with the requirement for compulsory Post Audits on all projects and other spends exceeding specified levels and lessons learnt and corrective action taken reported to Parliament
  3. Minister of Finance to table before Parliament along with the presentation of the Annual Budget computations developed by the Central Bank of the fiscal gap along with an analysis of debt sustainability status
  4. The Head of State should not concurrently hold the office of the Minister of Finance and Economic Planning
  5. Establish a Central Revenue Authority with high level representation by the Inland Revenue, Customs, Excise, Treasury, Finance Commission, Bribery Commission and Financial Intelligence Unit, Criminal Investigation Department and Money Laundering Unit, Directorate of Revenue Enforcement, and Attorney Generals Department, to ensure a well coordinated approach to state revenue collections optimization strategy development and implementation oversight
  6. Establish a Revenue Enforcement Directorate (similar in scope and objectives of the establishment in India) as a multi-disciplinary organization mandated with investigation of offence of money laundering and violations of foreign exchange laws
  7. The undernoted Legal Reforms be expeditiously arranged
  8. Enactment of a new Proceeds of Crime Act- There is no need to wait until mid 2024 to bring forth such a reform as a multi disciplinary local and foreign technical advisory group in late 2018 had already completed a draft ready for submission to the then Cabinet- titled of the “Policy and Legislative Framework of the Proposed Proceeds of Crime Act of Sri Lanka”-
  9. Enactment of a new Serious Financial & Organized Crime Agency Act
  10. Enactment of a new “Misfeasance in Public Office Law” drawing reference from : Law Commission of UK – Misconduct in public office legislation
  11. Set Up an Independent Office of a Criminal Prosecutor- Independent of the Office of the Attorney General benchmarking the Crown Prosecution Services of the UK
  12. Amend and update the Prevention of Money Laundering Acts including
  13. The avoidance of the presently problematic interpretation and restrictive provisions relating to applicable “Jurisdiction” references currently challenged in Court Proceedings
  14. To introduce more efficient, effective, accountable and confidentiality guaranteed processes in filing Mutual Legal Assistance Requests; and the transmission and response processing systems and accountability; including improved communications systems with third party jurisdictions authorities
  15. To facilitate a more efficient, effective, accountable and confidentiality guaranteed processes and systems in  empowering Police to Police, Police to Financial Intelligence Agencies in:
  • Networking and participating in joint investigations
  • processing Suspicious Transaction Reports
  1. Company Law Reforms- Expand the Provisions of Part XXI- Offenses of the Companies Act No. 7 of 2007
  2. Inland Revenue Act Reforms – Making Transfer Pricing Audit Certification compulsory for all entities with turnovers exceeding Rs 500 million by amending the current regulations
  3. Banking and Monetary Law Reforms- Issue Regulations making it compulsory that all aggregated transactions relating to a single transaction/event or contract, where it exceeds Rs. 500,000/= be made compulsorily via the formal Banking Channels
  4. Ensure that all International Conventions and Treaties relating to Serious Financial Crimes, Bribery, Corruption, Money Laundering , Recovery of Proceeds of Crime and Mutual Legal and Investigative Assistance which Sri Lanka had failed to be a signatory, Which Sri Lanka is a signatory but failed to have them ratified by Parliament, Which Sri Lanka is a signatory and had it ratified by Parliament but have not taken to implement the commitments as well as use the opportunities open through them, to be made effective in law and are leveraged by law enforcement authorities

10.Review and take reform actions essential as a consequence of Sri Lanka’s formally agreed Commitments Post the UK Anti-Corruption Summit in 2016 and its follow up meetings


  1. No Minister, Secretary or Public official be empowered to execute by way of a gazette, regulation, contract, a guarantee or any commitment/contingent commitment connected with a the acquisition or divestment of state assets, creation of a liabilities/contingent liabilities, or a commitment resulting in an impact on the state revenue, state spends or any change to an existing approved arrangements/processes/systems or an adjustment impacting on the national economy and society at large, without the due authority of the Cabinet of Ministers and reporting of same to the Public Finance Committee of Parliament


Core Structural Weaknesses in the selection/appointment/removal of key officials in Governance, Public Service and Independent Institutions that lead to corruption and good governance vulnerabilities must be reformed by

  1. By making the composition of the Constitutional Council to have a majority of persons who are either not members of Parliament and those who represent the opposition parties in the Parliament and require all High Post Holders listed in the Schedules of articles 41 B and 41 C of the Constitution to be nominated by the Constitutional Council to the President, following a Public Hearing before a Special Purposes Committee of the Parliament
  2. Amend “CHAPTER VIIA” of the Constitution to ensure that High Post Holders listed in both Schedules of articles 41 B and 41 C to be nominated by the Constitutional Committee to the President and add to the schedule under Article 41 C the Central Bank Governor, Governing Board and Monetary Policy Board of the Central Bank, Securities Exchange Commission members, The Members of the Office of the Independent Prosecutor, Heads of the Financial Intelligence Unit, the Criminal Investigation Department, the Money Laundering and Terrorism Financing Unit, Inland Revenue Department, Department of Customs and Head of the Revenue Authority and Revenue Enforcement Directorate
  3. All institutions and their key officials covered by the schedule of article 41 B should enjoy operational, administrative and financial autonomy / independence whilst all key officials covered by the schedule of article 41 C should enjoy operational and administrative autonomy/independence and such autonomy shall be respected at all times and no person or entity shall cause any influence in the exercise, performance and discharge of their powers, duties and functions assigned to them
  4. All key officials in Governance, Public Service and Independent Institutions to be bound by Codes of Conduct and Ethics, which codes shall require that binding commitments be made to Whistle Blowing, Non Compliance with Laws and Regulations Reporting (NOCLR), Conflicts of Interest Declarations and Commitments to act in good faith and in the best interest of the entity and the state; and to exercise the degree of skill and care that may reasonably be expected of a person of knowledge and experience and not be reckless or grossly negligent
  5. All such autonomous public institutions and officials shall Publish a report every 6 months and table same in Parliament setting out the key actions taken in pursuit of objectives, findings, follow up action and expected sustainable outcomes realized, with KPI’s for future assessments
  6. All law enforcement agencies be required to document all complaints, intelligence internally developed and received from other agencies local or international, media coverage and data analysis led amber signals and suspicious transaction reports and trading patterns other risk signals and to  have them duly investigated and prosecuted. They should publish a report every 6 months and table in Parliament of the actions taken in pursuit of objectives, findings, follow up action and expected sustainable outcomes with KPI’s for future assessments as well as reports to Parliament of all instances where complaints, intelligence or indictments with significant national economic value have not been progressed, investigated or prosecuted or where indictments filed have been withdrawn.


Core structural weaknesses connected with Independence and Professionalization of Law Enforcement and Judiciary and Public Services Professionalization and Good Governance Accountability

  1. By essential Constitutional Reforms incorporate express provisions guaranteeing the independence of the Judiciary and make it clear that the judiciary shall be independent of the executive and legislative organs of the State and that no authority shall have power to interfere with judicial functions and processes and further that the judicial Power of the People are vested directly in the Judiciary.
  2. A well structured high value embedding training and development program initiatives aimed at enhancing the Capability ( Knowledge, Skills, Attitudes and Values), Productivity and  Quality ( Economy, Efficiency and Effectiveness) of targeted high and mid level officers in key Public Services coordinated by  Ministries of  Finance, Economic Planning, Public Administration and Justice along with the Central Bank, Auditor General and Attorney Generals Departments, the Judicial Services Commission, Public Services Commission, The Finance Commission, be launched combining existing State Training and Development Resource Agencies like  Miloda Academy of Financial Studies , Sri Lanka Institute of Development Administration, Central Bank Training Centre, etc and update capabilities in Zero Based Budgeting, Scenario Planning, Post Audits, Forensics, Data Analytics, Investigation Skills, ICT, Digital Forensics, asset tracking  and recovery, Transfer Pricing Audits, Money Laundering, AI, Cloud Computing, block chain  cyber security, and especially in analysis and reconciliation of  increases in net assets with net incomes, tracing and tracking  “Contingent assets, assets created via entitlements, trusts, beneficial arrangements/interests and assets in orbit and in cloud as well as perks, benefits and entitlements in income determination: assess assets and entitlements to include all moveable and immovable property accumulated in Sri Lanka or overseas jurisdictions or placed in credit in beneficial interest arrangements created by transfer pricing and money laundering  and enhance capability in communicating/networking with international law enforcement agencies and developing professional Mutual Legal assistance requests


I trust that the above submission will lead to a more comprehensive focus on some Core Structural Weaknesses that need to be recognized in the planning phase of the governance diagnostic exercise by the IMF.


Yours Sincerely,



Chandra Jayaratne

  1. President, Prime Minister,     Minister of Justice,      Governor Central Bank,      Secretary Treasury,      Attorney General,

Auditor General,       Speaker of Parliament,         Leader of the Opposition,      CSO Community Concerned Core Group,






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