Former Central Bank Governor Arjuna Mahendran, wanted by Sri Lankan authorities over the bond scam, speaking to CNN Philippines about the island nation’s crisis situation said the government of Sri Lanka is finding it difficult to persuade lenders.

In response to a question on the events that led to the collapse of Sri Lanka’s economy, Mahendran said the abrupt tax cuts introduced by the incumbent government created inflationary pressure as most of the government spending had been funded by the printing of new money.

He also said: “There was a change in the agricultural policy regarding the imports of fertilizer, where there was a switch from chemical fertilizer to organic and that deeply affected the plantations which export tea and other products. Once COVID struck Sri Lanka, the economy was already faltering. This is why Sri Lanka has been affected much earlier than other countries.”

Mahendran pointed out that some of the taxation rates need to be increased to previous rates so that the government budget and money printing do not get completely out of control. He added that agricultural practices should be reverted and more time should be given for any drastic changes.

Speaking further, he said the lack of foreign exchange reserves needs to be addressed by some sort of new lending. Due to the accumulation of previous debts, Sri Lankan government is finding it very difficult to persuade lenders even India to put in fresh money, Mahendran added.

“I am informed that the Prime Minister is back at work. He is in his office. So, the government is functioning and as I said there are crucial talks going on regarding the economy and economic policy in general which has to be set right fast before this economic crisis really results in starvation and unnecessary pain for the population of Sri Lanka.”

Mahendran, who is named the first suspect in the case filed over the 2015 and 2016 bond scam is a fugitive wanted by the Sri Lankan authorities.

He was found to have been involved in the financial irregularities that occurred in issuing of treasury bonds from February 2015 to May 2016 by the Central Bank which incurred a massive loss to the government. It is reported that he took shelter in Singapore soon after irregularities in the Central Bank’s bond transactions came to light.

Sri Lanka on several occasions requested Singapore to facilitate the extradition of Mahendran, however, the appeal is yet to receive a response. Meanwhile, the INTERPOL has issued Red Notices for the arrest of the former Central Bank governor.