Foreigners buy US$3mn worth Sri Lanka bonds amid stabilizing rupee

ECONOMYNEXT – Foreign investors bought a net US$3 million worth of Sri Lanka government securities in the week ended July 2, Central Bank data showed, as the rupee currency was recovering from near four-year low hit in May. Foreigners sold a net 1,001 million rupees (US$3 million at 1$=330 rupees) in the week. Despite the latest weekly inflow, Sri Lanka has suffered a total net outflow of around US$13.7 million so far this year amid sharp rupee volatility in the last two months. The rupee currency’s selling rate fell to as low as 354 against the U.S. dollar on May 21 before recovering and gaining to the 330 level. This week it appreciated to 330 level, the Central Bank data showed. The rupee had been steady for more than three years before the latest depreciation with the Central Bank citing higher oil and vehicle imports amid a lingering conflict in the Middle East. The rupee has fallen 7.7 percent through July 2 this year. The island nation witnessed a net inflow of over Rs.14.5 billion rupees in the previous week after the rupee started to stabilize. Globally, investors are cautious about economic growth due to the impact of the latest Middle East escalation. The island nation enjoyed a total inflow of around 71.5 billion rupees (around US$234.4 million) into rupee bonds last year. Analysts said Sri Lanka’s deflationary policies in the past helped inflows amid curtailed imports. However, the island nation has seen an uptick in inflation in the last three months after nearly 50 percent hike in fuel prices gradually. The government reduced the fuel price in the last week of June. The Central Bank raised its key monetary policy rate by 100 basis points in May to curb inflationary pressure stemming from higher demand. Before the May rate hike, the Central Bank kept its key policy rates steady since May 2025 after reducing them by 825 basis points over 24 months since June 2023 and foreign investors have been buying rupee bonds despite slight depreciation in the local currency. (Colombo/July 07/2026)