Market shows cautious optimism despite global volatility
Foreign investors injected $1.8 million into Sri Lankan rupee-denominated government securities during the week ending May 22, reversing a brief period of outflows, according to data released by the Central Bank.
The inflow — equivalent to 548 million rupees — came after two weeks of foreign exits following global jitters triggered by former U.S. President Donald Trump’s tariff declarations, which pushed investors toward traditional safe-haven assets like gold.
Despite recent fluctuations, Sri Lanka has seen a steady stream of foreign interest since late 2023. From December 26 onwards, total foreign inflows into rupee government securities have reached 20.96 billion rupees, or approximately $69.9 million.
Official data also shows a cumulative inflow of 29.9 billion rupees into treasury bonds and bills over a 15-week period ending December 26, with the total value of government securities held by foreigners standing at 69.26 billion rupees at that time.
Analysts note that Sri Lanka’s deflationary economic policies and restrained import activity have contributed to an environment conducive to foreign investment in local debt instruments.
Nevertheless, challenges remain. The country recorded foreign outflows totaling 48.2 billion rupees in 2024, with a sharp 78.1 billion rupees exiting the government securities market in the first nine months of the previous year — 66% of total outflows.
As the global investment climate remains uncertain, Sri Lanka’s bond market performance will likely continue to hinge on external developments and the country’s ongoing macroeconomic stabilization efforts.