Foreign investors sold a net Rs.7.328 billion (US$22.55 million) worth of Sri Lanka government securities in the week ended May 27, Central Bank data showed, despite the rupee recovering from the fresh lows it set earlier in the month, EconomyNext reported.
The latest weekly sale extends a streak of three consecutive weeks of foreign outflows, taking the cumulative loss to more than US$51 million. The selling has coincided with the sharpest rupee depreciation since the 2022 default, with the currency falling as low as 354 against the US dollar on May 20 before recovering to the 334 level.
The rupee is now down 5.4 percent year-to-date, with the Central Bank attributing the slide to higher oil and vehicle imports against the backdrop of the lingering Middle East conflict. Before this year’s selloff, the rupee had been broadly stable for more than three years.
Cumulative foreign positioning in rupee bonds has now turned negative for the year. Sri Lanka has registered a net outflow of around Rs.14.3 billion across the first 21 weeks of 2026, reversing the Rs.21,863 million inflow recorded in the first six weeks alone. Total inflows for all of 2025 stood at approximately Rs.71.5 billion (US$234.4 million).
The Central Bank earlier this week raised its key policy rate by 100 basis points to 8.75 percent, citing inflationary pressure stemming from stronger demand and a more than 35 percent hike in fuel prices that has begun to push consumer prices higher again after a year of subdued inflation. The hike followed 825 basis points of cuts spread over the 24 months from June 2023, and was the first move on rates since May 2025.
EconomyNext quoted analysts as saying Sri Lanka’s earlier deflationary stance helped attract bond inflows while imports were curtailed, but global investor caution over the Middle East has now caught up with the local market.
Source: EconomyNext.
