FINANCIAL CHRONICLE – In the week ending August 14, foreign investors purchased a net total of 1.35 billion rupees (approximately US$4.1 million) in Sri Lanka rupee-denominated bonds, according to data from the Central Bank. This recent investment has contributed to a total of 72.9 billion rupees (about US$220.8 million) in foreign purchases of government securities over the past nine weeks, dating back to June 19.
The surge in foreign investment has increased total foreign holdings to 194.2 billion rupees, marking the highest level reported in the Central Bank’s Weekly Economic Indicators. However, Central Bank officials cautioned that this figure may not necessarily be a record high, as it is subject to daily fluctuations due to economic volatility.
Analysts noted that these net inflows followed a period of relative stability for the Sri Lankan rupee. The currency’s selling rate had dipped to a nearly three-year low of 354 against the U.S. dollar on May 21, but has since improved, stabilizing around the 340 mark. Prior to this significant depreciation in May, the rupee had maintained a steady value for over three years. The Central Bank attributed the downturn to increased imports of oil and vehicles amidst ongoing tensions in the Middle East, leading to a 7.1 percent decline in the rupee’s value as of August 14 this year.
On a global scale, investors remain cautious regarding economic growth in light of recent escalations in the Middle East. For the year to date, Sri Lanka has recorded an inflow of approximately 52.9 billion rupees into rupee bonds, following a net inflow of 71.5 billion rupees in the previous year.
Experts have indicated that Sri Lanka’s previous deflationary measures have facilitated these inflows, particularly as import levels were reduced. Nonetheless, the country has experienced a rise in inflation over the past three months, largely due to a phased increase in fuel prices that reached nearly 50 percent. In response, the government lowered fuel prices during the last week of June and maintained them through July.
To combat inflationary pressures linked to 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 kept its key rates unchanged since May 2025, having reduced them by 825 basis points over a 24-month period starting in June 2023. Despite minor depreciation of the local currency, foreign investors have continued to show interest in Sri Lanka’s rupee bonds. (Colombo/August 15/2026)
