Foreign Investors Sell USD 5 Million in SL Government Securities

Foreign investors sold around USD 5 million worth of Sri Lankan government securities in the week ending December 24, reversing the inflows recorded the previous week, according to Central Bank data. The sell-off reflects investors’ shift to safe-haven assets amid speculation of further interest rate cuts by the U.S. Federal Reserve.

This marked the fifth week of foreign sales of rupee bonds in the last 17 weeks, with holdings in government securities declining from a near two-year high. Investors sold a net 1.545 billion rupees (USD 5.06 million at 1 USD = 305 rupees) during the week, after purchasing bonds worth USD 2.44 million the week before.

The selling follows a broader global trend of shifting funds into safe-haven assets such as gold. Gold prices, buoyed by safe-haven demand and rising expectations of additional Fed rate cuts, surged to record highs last week.

Despite the recent outflows, Sri Lanka has recorded net foreign inflows of 33.855 billion rupees (USD 111 million) over the past 17 weeks. Total inflows into rupee bonds since December 26 last year reached approximately 70.6 billion rupees (USD 231 million).

Historically, the country saw an outflow of 10.1 billion rupees (USD 32 million) in the two weeks following former U.S. President Donald Trump’s tariff declaration in early April, with the rupee weakening slightly afterward. Analysts note that Sri Lanka’s deflationary policies and curtailed imports have supported inflows despite global uncertainties.

In 2024, Sri Lanka experienced foreign outflows of 48.2 billion rupees, with 66 percent (approximately 78.1 billion rupees) stemming from government securities in the first nine months of the year.