Foreign investors sold Sri Lanka rupee bonds for a second consecutive week in the week ended 25 September, Central Bank data shows — reversing a run of buying that had lasted more than three months.
Offshore investors sold a net Rs. 9,169 million (US$27.8 million), taking net selling over the two weeks to Rs. 16.5 billion, EconomyNext reported.
The scale of the reversal, in context
The two selling weeks follow 13 straight weeks of buying worth Rs. 92 billion (US$280 million). Put against that, the outflow has given back under a fifth of what came in — these are the only two selling weeks in the last 15.
Foreign holdings of government securities now stand at Rs. 196.9 billion, down from the highest level the Central Bank has published in its Weekly Economic Indicators, reached two weeks earlier.
The year as a whole remains positive: Sri Lanka has taken a net Rs. 55.7 billion into rupee bonds so far in 2026, after Rs. 71.5 billion for the whole of last year.
Why the turn
Analysts cited by EconomyNext attribute the reversal to the rupee’s depreciation.
The currency’s selling rate fell to a near three-year low of 354 to the US dollar on 21 May before recovering to around 332 by the week ended 11 September. It gained slightly in the week under review. The rupee is down 6.2% through 25 September.
That currency move is the mechanism: a foreign holder of rupee-denominated debt loses in dollar terms when the rupee falls, regardless of the coupon. Notably, EconomyNext observes that foreign investors had been buying through earlier mild depreciation — the selling started only after the sharp May move.
The rupee had been broadly steady for more than three years before May. The Central Bank attributed the fall to higher oil and vehicle imports amid the continuing conflict in the Middle East.
The wider setting
Sri Lanka has seen inflation pick up over the last five months following a near-50% rise in fuel prices, though the government cut prices twice, in the last weeks of June and August.
The Central Bank raised its key policy rate by 100 basis points in May to contain demand-driven price pressure. Before that it had held rates steady since May 2025, after cutting by 825 basis points over the 24 months from June 2023.
Globally, EconomyNext notes investors are cautious on growth because of the latest Middle East escalation — so the outflow is not necessarily specific to Sri Lanka.
Related
The Central Bank held the policy rate at 8.75% on Wednesday amid the inflation pickup referred to above. The rupee was quoted at 330.68/75 to the dollar in the spot market on Wednesday, little changed from the previous day.
EconomyNext is the only verified newsroom to have reported this week’s securities data at the time of writing; the underlying figures are the Central Bank’s own Weekly Economic Indicators.