Foreign investors exit Sri Lanka rupee bonds for third straight week

EconomyNext reports that foreign investors sold a net Rs. 6.075 billion (US$218.4 million) of Sri Lankan rupee-denominated bonds in the week ending November 5, marking a third consecutive week of net selling. Hiru News also reports that the sell-off continued for a third straight week.

EconomyNext says the latest sales bring net foreign outflows over five weeks to Rs. 28.5 billion. Despite those recent outflows, EconomyNext reports that net investment in local-currency bonds has risen by about Rs. 43.6 billion so far this year, following a net inflow of Rs. 71.5 billion last year. It adds that foreign investors recorded net selling in five of the past 21 weeks.

EconomyNext reports that the rupee had been stable for more than three years before a sharp decline in May, and had fallen 6.7% by November 6 this year. The outlet attributes the Central Bank’s explanation for the May weakness to increased oil and vehicle imports amid continuing conflict in the Middle East.

EconomyNext says the Central Bank raised its key policy rate by 100 basis points in May to address inflationary pressure from stronger demand, after keeping rates unchanged since May 2025 following cuts totalling 825 basis points over 24 months from June 2023. The outlet reports that inflation rose over the past seven months after fuel prices increased by nearly 50%, and that the government raised fuel prices again in the final week of October.

EconomyNext reports that analysts linked the bond sales to global and political developments, including the US midterm elections, hopes for an end to hostilities involving Iran, and the Israeli prime minister’s failure to secure a majority in an election. It also says investors globally have been cautious about economic growth amid renewed escalation in the Middle East.