• Reasons are depreciated currency, negative real interest rate, claims Harsha
• Says haircut taken even before local debt sustainability
• Adds total fund value drops to $ 9.5 bn 

Employees’ Provident Fund (EPF) has already been subjected to a haircut of 35-40% in US dollar (USD) terms due to the depreciation of the Sri Lankan rupee (LKR) and the negative real interest rate paid per annum, Opposition MP Dr. Harsha de Silva said.

Speaking in Parliament yesterday (9), the Samagi Jana Balawegaya (SJB) MP said that EPF the total fund value in US dollar terms has come down to $ 9.5 billion in 2022 from $ 15.8 billion as of the end of 2021.

He added that although the value increased by another $ 1.2 billion in the last month due to the appreciation of the rupee, the fund has already been subjected to a haircut of 35-40% in US dollar terms even before something is done by the authorities to achieve debt sustainability via local debt.

Moreover, he said that the real interest rate paid on the member balance of the EPF fund was -47% in 2022 while for the Employees’ Trust Fund (ETF) it was -48.4%, as the interest rates of the fund remained at 9% while the inflation was 57.2% in 2022.

He said that the EPF act says that “an interest at such a rate of not less than 2.5% per annum should be paid to the credit of the individual account of  the member.” 

He added that considering the interest rate paid on Treasury Bills in the 1950s which was 1%, double the amount that should be paid to the members of the fund, therefore, he said it should be the real interest rate that is mentioned as 2.5% in the act.

“What is this 2.5%? Is it nominal interest or real interest? In the 1950s the interest paid on Treasury Bills was about 1%, so double that amount should be paid for the EPF according to Illangaratne who brought this Act. So we are talking about the real interest because if the inflation is 57% and then the interest paid to the EPF is 9% then there is -47% real interest paid,” he said.

According to Central Bank of Sri Lanka (CBSL) Data, the net worth of the EPF increased to Rs. 3,459 billion ($ 9.5 billion with the exchange rate on 31 December) as of the end of 2022 compared to Rs. 3,166 billion ($ 15.5 billion) in 2021.