ECONOMYNEXT – Sri Lanka witnessed foreigners selling its government securities for the first time in 13 weeks after the island nation saw foreign inflow of nearly $100 million in the previous 12 straight weeks, the Central Bank data showed.
Analysts said foreign investors are worried about possible reverse in rupee appreciation amid Sri Lanka’s impending decision to relax imports.
“Foreign investors have been taking risks and buying Sri Lanka government securities for the past three months because they had been expecting rupee appreciation and further reduction in the market interest rates,” a Colombo-based currency dealer told EconomyNext.
Sri Lanka has been maintaining deflationary policies and import curbs amid declining interest rates after the inflation hit record high of over 70 percent in 2022.
Sri Lanka saw 2.1 billion rupees ($7.2 million at 1 US dollar = 290 LKR) outflow from government securities in the week ended on December 12. The government saw total inflows of 28.8 billion rupees ($99.4 mln) into treasury bonds and bills in the previous 12 straight weeks through December 05, the official data showed.
The value of government securities held by foreign investors was at 66,050 million rupees by December 12.
Analysts say Sri Lanka’s deflationary policies have helped to see inflows amid curtailed imports.
The new inflows came after Sri Lanka saw a strong mandate given to Marxists Janatha Vimukthi Peramuna (JVP) leader Anura Kumara Dissanayake in the parliament elections on November 14.
The President’s party has pledged to end deep-rooted systematic corruption in Sri Lanka. The island nation has not changed its economic policy directions since Dissanayake was elected.
The Central Bank data show foreign investors held 117.4 billion rupees worth of government securities at the start of 2024. However, Sri Lanka suffered a foreign outflow of 66 percent or 78.1 billion rupees worth government securities in the first nine months of this year. (Colombo/December 18/2024)