By The Pulseline News Desk
Foreign investors have sold nearly $ 13.9 million worth of Sri Lanka government securities in the week ending May 21, according to Central Bank of Sri Lanka (CBSL) data, as pressure on the rupee and concerns over inflation continued to weigh on investor sentiment.
The latest figures showed a net outflow of Rs. 4,580 million, equivalent to approximately $ 13.87 million at an exchange rate of Rs. 330 to the dollar, marking another setback for Sri Lanka’s government securities market amid renewed currency volatility.
The outflow comes at a time when the Sri Lankan rupee has come under increasing depreciation pressure after remaining relatively stable for more than three years. So far this year, the rupee has weakened by more than seven percent against the US dollar.
CBSL data has also indicated that Sri Lanka recorded a cumulative net outflow of around Rs. 6,939 million during the first 20 weeks of the year. This marks a sharp reversal from the strong inflows seen earlier in 2025, when the country posted a net inflow of Rs. 21,863 million during the first six weeks.
Analysts say the changing trend reflects growing investor caution both domestically and globally.
Internationally, markets have become increasingly sensitive to concerns over slowing economic growth and geopolitical instability following the latest escalation in the Middle East, prompting investors to shift toward safer assets.
Despite the recent outflows, Sri Lanka’s government securities market had performed strongly last year, attracting total foreign inflows of approximately Rs. 71.5 billion, or around $ 234.4 million.
Economists attributed much of that investor confidence to Sri Lanka’s tight monetary and deflationary policy stance, which had helped stabilise macroeconomic conditions while restricting imports and easing pressure on foreign reserves.
However, the economic environment has shifted in recent weeks following a sharp rise in inflationary expectations.
Sri Lanka recorded a noticeable uptick in inflation last month after fuel prices were increased by more than 35 percent, raising concerns over the cost of living and the broader inflation outlook.
Market analysts say the combination of accelerating inflation and the weakening rupee has intensified scrutiny over the CBSL’s next monetary policy announcement, scheduled for Tuesday.
The CBSL has kept its key policy rates unchanged since May last year after aggressively cutting rates by a cumulative 825 basis points over a 24-month period beginning in June 2023.
Although foreign investors continued purchasing rupee-denominated bonds for much of the past year despite currency depreciation risks, recent outflows suggest growing caution about Sri Lanka’s short-term economic trajectory and the direction of monetary policy in the months ahead.
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