Today marks a decade since the most controversial treasury bond auction in the history of Sri Lanka’s capital market.
On February 27, 2015, the Central Bank of Sri Lanka (CBSL) offered Rs. 1,000 million worth of treasury bonds for auction. At that time, the prevailing interest rate for similar debt instruments in the bond market was approximately 9.50%.
However, the auction attracted an unusually large bid of Rs. 20,708 million—far exceeding the initial offer. Following the bidding process, CBSL approved treasury bond allocations worth Rs. 10,058 million.
A key point of contention in this issuance was the significantly higher interest rate at which the bonds were issued—12.50%, well above the market rate. This raised serious concerns about irregularities in the process, triggering widespread controversy across the country within days.
The fallout from the scandal was swift. Then-Central Bank Governor Arjuna Mahendran lost his position, and Arjun Aloysius, head of Perpetual Treasuries—a key player in the transaction—was imprisoned. The controversy was further fueled by the close relationship between Mahendran and Aloysius. The repercussions of the scandal also led to the resignation of then-Finance Minister Ravi Karunanayake.
Despite the passage of 10 years, court proceedings related to the case remain ongoing. The bond is set to mature on March 1, 2045, with one-third of its term already elapsed.
