Foreign investors bought a net Rs 1,350 million (US$4.1 million) of Sri Lanka rupee bonds in the week ended August 14, extending net buying in government securities to nine consecutive weeks, Central Bank data show.
The latest purchases take cumulative foreign buying since June 19 to Rs 72.9 billion (US$220.8 million) and lift foreign holdings of rupee bonds to Rs 194.2 billion — the highest figure the Central Bank has published in its Weekly Economic Indicators.
Central Bank officials cautioned that this may not be an all-time record, as the figure moves daily through the week with economic volatility.
The week’s inflow was well below the Rs 4,036 million recorded in the week to August 7, when the eight-week run had lifted holdings to Rs 192.9 billion.
Currency steadier
Analysts attributed the continued inflows to the rupee stabilising. The currency’s selling rate fell to a near three-year low of Rs 354 against the US dollar on May 21 before recovering to the Rs 340 level. The rupee has fallen 7.1 percent through August 14 this year, an improvement on the 7.6 percent decline recorded through August 7.
The rupee had held steady for more than three years before the sharp depreciation in May, which the Central Bank attributed to higher oil and vehicle imports amid the continuing conflict in the Middle East.
Inflation and policy backdrop
Sri Lanka has drawn total inflows of around Rs 52.9 billion into rupee bonds so far this year, against a net Rs 71.5 billion for the whole of last year.
Analysts said deflationary policies in earlier years supported inflows amid curtailed imports, though inflation has picked up over the past three months following a near 50 percent rise in fuel prices. The government reduced fuel prices in the last week of June and held them steady through July.
The Central Bank raised its key policy rate by 100 basis points in May to curb inflationary pressure stemming from higher demand. Before that increase it had kept rates steady since May 2025, following 825 basis points of cuts over 24 months from June 2023.
Globally, investors remain cautious on growth because of the latest Middle East escalation.