According to Central Bank data, foreign investors sold Sri Lankan government assets in the week ending January 30 after purchasing them for two weeks. Analysts ascribed the sale to a decline in interest rates and concerns over the local currency’s depreciation.
In the final 15 weeks of 2024, international inflows of almost $100 million into government securities were drawn to Sri Lanka by its deflationary policies and import restrictions in the face of falling interest rates. Following a cumulative inflow of 12.77 billion rupees ($43.4 million) over the preceding two weeks, Sri Lanka had withdrawals of 2.03 billion rupees ($6.9 million at 1 US dollar = 294 LKR) from government assets in the week ending January 30.
According to a currency dealer in Colombo, “this could be primarily due to falling interest rates and the expectation of rupee depreciation.”
“The government securities’ returns are declining. The anticipated rise in imports may potentially cause the currency to weaken.
According to official figures, the island nation saw inflows of 29.9 billion rupees into treasury bonds and bills for the 15 weeks ending December 26.
By December 26, foreign investors’ holdings of government securities were worth 69,262 million rupees.
Since then, it has gone up by 8.68 billion rupees, or 12.5%.
Despite reduced imports, analysts argue Sri Lanka’s deflationary policies have contributed to inflows.
In 2024, the nation saw outflows of 48.2 billion rupees from outside, with 78.1 billion rupees, or 66%, coming from government securities in the first nine months of the previous year.