August 12, 2017 4:44 pm JST

Sri Lanka foreign minister resigns over corruption charges

COLOMBO (Reuters) -- Sri Lanka's foreign minister resigned on Thursday over corruption charges in an investigation of alleged irregularities in government bond sales, maintaining that he was not guilty of wrongdoing.

The resignation of Ravi Karunanayake, a former finance minister, follows demands for his removal by both the government and the opposition, after the panel looking into the sales found his apartment rental was paid by an official being investigated.

"I have never done anything wrong, and I resign with pride to create a new political culture in Sri Lanka and ensure good governance," Karunanayake told parliament in a statement after announcing his resignation.

He said he would continue in the party as a backbench member of parliament, however.

"I have never earned any money from politics," he said.

The allegations followed Karunanayake's appearance before the panel last week, and he has not been charged by any court.

President Maithripala Sirisena's government has pledged to end the rampant corruption that affected the Indian Ocean island's previous government.

Sirisena appointed a presidential commission to investigate, following the demands of opposition lawmakers, who said the controversial bond auction lost the state more than $1 billion, because of rising borrowing costs in the past two years.

The central bank has dismissed the opposition's claims.

The auction, originally intended to sell 1 billion rupees ($7 million) of 30-year bonds, eventually grew to more than 10 times that amount, to meet government borrowing needs.

More than half of the issue was sold to Perpetual Treasuries, a subsidiary of a company owned by the son-in-law of the former central bank governor, Arjuna Mahendran, in what has been criticised as a conflict of interest.

Perpetual Treasuries, Mahendran, and his son-in-law had denied any wrong doing.

Karunanayake last week told the panel he had no knowledge that the apartment rental was paid by Mahendran's son-in-law.

On Thursday, he told parliament that one of his daughters leased the apartment through the son-in-law of the former central bank governor, and the money had already been repaid.

Sirisena appointed Karunanayake, a key strategist in helping to topple the former government, as foreign minister on May 22. Until then, he had been finance minister since January 2015.

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