The Central Bank of Sri Lanka bought a net US$579 million from the domestic foreign exchange market in August, official data show — its largest monthly absorption since March 2024.
The Central Bank sold no dollars at all during the month. That is a sharp reversal from May, when it sold more than US$211 million on a net basis, its first net selling month in 22 months.
Net purchases for the first eight months of 2026 now stand at US$1,484 million, following a net purchase of US$2 billion across the whole of last year.
Why the rupee turned
The May selling coincided with heavy downward pressure on the rupee, which touched a four-year low that month. The fuel import bill rose unusually high after the escalation in the Middle East, and demand for dollars to buy new vehicles remained strong.
That pressure has since eased, and the currency has been appreciating — the conditions under which the Central Bank has been able to buy rather than defend.
What the buying is for
The Central Bank has been buying dollars aggressively to build foreign currency reserves toward the targets agreed with the International Monetary Fund under the US$3 billion Extended Fund Facility, and to repay multilateral and bilateral loans.
The reserve building is also positioning for a larger obligation ahead: repayments to sovereign bond holders fall due in April 2028.
Context
The August figure gives a scale to a trend the market has been reading in daily quotes. The rupee has been trading around 328 to the US dollar in recent sessions, with bond yields broadly steady.
Neither report says how long the Central Bank intends to keep absorbing dollars at the August pace, what its current gross reserve position is, or whether the August total puts it ahead of or behind the IMF’s reserve target for the year — a question that has now stood open across several months of these monthly releases.
