Foreign holdings in Sri Lanka government securities reached a 27 month high last week after offshore investors bought around US$21.5 million worth of bonds in the week ending January 29, Central Bank data showed.

Foreigners bought a net 6,632 million rupees (US$21.5 million at 1$=308 rupees) in the week. It was the 15th week foreigners have bought rupee bonds in the last 22.

In the previous two weeks, they sold a net 1,398 million rupee worth of rupee bonds, the data showed.

The latest foreign buying has helped the island nation to see a net foreign inflow of 5,191 million rupees (US$16.9 million) in the first four weeks of January, data showed. The buying also has boosted the foreign holding in the rupee bonds to its highest since November 1, 2023, the Central Bank data showed.

Globally, investors have been cautious amid possible rate cuts by the U.S. Federal Reserves after President Donald Trump announced former Federal Reserve governor Kevin Warsh as his choice to become the next chair of ​the Fed. Warsh is seen as an advocate of lower interest rates.

When the Fed cuts interest rates, it triggers a chain reaction in global finance that effectively pushes capital out of the U.S. and pulls it toward riskier or alternative assets like emerging markets and metals, which could benefit countries like Sri Lanka.

The island nation enjoyed a total inflow of around 71.5 billion rupees (around US$234.4 million) into rupee bonds in 2025.

Sri Lanka suffered an outflow of 10.1 billion rupees ($32 million) in the two weeks soon after Donald Trump’s tariff declaration in the first week of April last year and the rupee has fallen since then.

Sri Lanka’s deflationary policies have helped to see inflows amid curtailed imports, analysts have said.

Sri Lanka’s central bank has kept its key policy rates steady since May last year after reducing them by 825 basis points through 24 months and foreign investors have been buying rupee bonds despite depreciation in the local currency. 

( Source-ECONOMYNEXT )