FINANCIAL CHRONICLE – According to data from the Central Bank, foreign investors acquired a net total of 71.7 billion rupees (approximately US$216.7 million) in Sri Lanka rupee bonds over an uninterrupted span of eight weeks leading up to August 7. This trend occurred in the context of a strengthening rupee.
During the week ending August 7, foreign purchases amounted to 4,036 million rupees (around US$12.2 million at an exchange rate of 1$=330 rupees), bringing the cumulative foreign investment in government securities since June 19 to 71.5 billion rupees (US$216.7 million). This surge has elevated the total foreign holdings to 192.9 billion rupees, which is the highest figure recorded in the Central Bank’s Weekly Economic Indicators.
Nevertheless, a Central Bank official noted that this figure may not represent an absolute peak, as it fluctuates daily due to economic volatility. Analysts attribute the influx of capital to the stabilization of the rupee currency.
After hitting a nearly three-year low of 354 against the U.S. dollar on May 21, the rupee has since rebounded to approximately 340. Prior to the sharp decline in May, the rupee had remained relatively stable for over three years, with the Central Bank attributing the depreciation to increased oil and vehicle imports amid ongoing tensions in the Middle East. As of August 7, the rupee’s value has diminished by 7.6 percent this year.
Globally, investors are exhibiting caution regarding economic growth due to the repercussions of the recent escalation in the Middle East. For the current year, Sri Lanka has welcomed an approximate total of 51.5 billion rupees in rupee bond inflows, following a net inflow of 71.5 billion rupees in the previous year.
Experts indicate that Sri Lanka’s previous deflationary policies have facilitated these inflows while limiting imports. However, the island nation has experienced a rise in inflation over the last three months, coinciding with a nearly 50 percent increase in fuel prices. The government had reduced fuel prices in the final week of June and maintained them through July.
In response to inflationary pressures driven by heightened demand, the Central Bank increased its key monetary policy rate by 100 basis points in May. Prior to this adjustment, the Central Bank had maintained stable key policy rates since May 2025, following a cumulative reduction of 825 basis points over a 24-month period starting in June 2023. Despite minor depreciation of the local currency, foreign investors have continued to purchase rupee bonds. (Colombo/August 10/2026)
