Foreign holdings in Sri Lankan government securities reached a nearly 28-month high last week, as offshore investors purchased approximately US$24.2 million worth of bonds, according to data from the Central Bank. During the week ending February 5, foreign investors acquired a net total of 7,463 million rupees (equivalent to US$24.2 million at an exchange rate of 1$=308 rupees). This marks the 16th week of foreign acquisitions of rupee bonds over the past 23 weeks.
The preceding week witnessed a net purchase of 6,632 million rupees (US$21.5 million) in rupee bonds by foreign investors. The latest influx of foreign investment has contributed to a net foreign inflow of 12,654 million rupees (US$41.1 million) in the first five weeks of the year. This activity has driven foreign holdings in rupee bonds to their highest level since October 19, 2023.
Globally, investors have been exercising caution due to potential interest rate cuts by the U.S. Federal Reserve. Such rate cuts can initiate a chain reaction in global finance, leading to 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 Donald Trump’s tariff announcement in the first week of April last year, which contributed to a decline in the rupee’s value.
Analysts suggest that Sri Lanka’s deflationary policies, alongside reduced imports, have facilitated these inflows. Despite the depreciation of the local currency, foreign investors continue to show interest in rupee bonds. The Central Bank of Sri Lanka has maintained steady key policy rates since May of last year, following a reduction of 825 basis points over a 24-month period.
(Colombo/February 08/2026)
