Foreign investments in Sri Lanka’s government securities have reached their highest level in 27 months, as offshore investors purchased approximately US$21.5 million worth of bonds during the week ending January 29, according to data from the Central Bank. This net purchase of 6,632 million rupees (equivalent to US$21.5 million at an exchange rate of 1 USD = 308 rupees) marks the 15th week of foreign acquisition of rupee bonds out of the last 22 weeks.
In contrast, foreign investors had sold a net amount of 1,398 million rupees worth of rupee bonds over the previous two weeks. The recent surge in foreign buying has resulted in a net foreign inflow of 5,191 million rupees (US$16.9 million) during the first four weeks of January, boosting foreign holdings in rupee bonds to their highest level since November 1, 2023.
On the global front, investors have exhibited caution over potential rate cuts by the U.S. Federal Reserve. President Donald Trump has announced former Federal Reserve governor Kevin Warsh as his nominee for the next chair of the Fed, who is perceived as a proponent of lower interest rates. Such rate cuts by the Fed could lead to a shift in global financial dynamics, encouraging capital movement away from the U.S. and towards riskier or alternative assets, such as emerging markets and metals, potentially benefiting countries like Sri Lanka.
In 2025, Sri Lanka experienced a total inflow of approximately 71.5 billion rupees (around US$234.4 million) into rupee bonds. However, the country faced an outflow of 10.1 billion rupees (US$32 million) in the two weeks following President Trump’s tariff announcement in early April last year, which has contributed to a decline in the rupee’s value since then.
Analysts attribute the inflow of funds to Sri Lanka’s deflationary policies, which have helped to mitigate imports. Despite the depreciation of the local currency, the Central Bank of Sri Lanka has maintained steady key policy rates since May of the previous year, following a reduction of 825 basis points over 24 months, encouraging foreign investment in rupee bonds.
(Colombo/February 01/2026)
