The recent uptick in foreign investment marks a notable turnaround from earlier in the year when Sri Lanka experienced a 66 per cent outflow, equivalent to 78.1 billion rupees, from government securities during the first nine months.
Sri Lanka recorded offshore inflows into its government securities for the 10th consecutive week ending November 21, driven by speculation over a potential rate cut and a strengthening rupee, according to data from the Central Bank of Sri Lanka.
Foreign investors injected 702 million rupees ($2.38 million) into treasury bonds and bills during the week, pushing the cumulative inflows over the past 10 weeks to 16.2 billion rupees ($55 million). By November 21, the total foreign-held value of Sri Lankan government securities stood at 55.55 billion rupees.
Analysts attribute the sustained inflows to expectations of a rate cut in the upcoming Monetary Policy Review meeting on Tuesday, with the Central Bank set to announce its decision on Wednesday, November 27. A currency dealer noted that investors anticipate capital gains through rupee appreciation and falling market interest rates, creating a favorable environment for investment.
Entrenched Corruption
Sri Lanka’s deflationary policies and reduced imports have also contributed to the recent inflows, analysts say. The country’s economic trajectory has seen improvement following a decisive electoral victory by the Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) coalition, headed by Anura Kumara Dissanayake.
The NPP secured 159 seats in the 225-member parliament during the November 14 elections, marking a strong mandate. President Dissanayake’s administration has pledged to address entrenched corruption while adhering to the International Monetary Fund (IMF) loan program.
Despite the political transition, Sri Lanka has maintained its economic policies, providing reassurance to investors. Analysts suggest the stability and anti-corruption stance of the new government could further bolster investor confidence.
This recent uptick in foreign investment marks a notable turnaround from earlier in the year when Sri Lanka experienced a 66 per cent outflow, equivalent to 78.1 billion rupees, from government securities during the first nine months.
The continued inflows signal growing confidence in Sri Lanka’s financial recovery, with the monetary policy decision this week poised to play a pivotal role in shaping future investor sentiment.
