Foreign investors buy Sri Lanka Treasuries

ECONOMYNEXT – Foreign investors have bought 4.2 billion rupees of rupee bonds in the week to November 20, taking the total stock up to 120.8 billion rupees, official data showed.

Foreign investors started selling down rupee Treasuries from around May 2019, when they held 157 billion rupees of bonds.

Foreigners also sold during the balance of payments troubles in the second half of 2018, triggered by excess liquidity shock from around August, which was worsened by a political crisis, which delivered a negative confidence shock.

“Government will instill confidence in the economy, which will attract foreign investments into Treasury bills and bonds,” Senior Economic Advisor to Sri Lanka’s Finance Minister Nivard Cabraal said last week.

In recent years, Sri Lanka has been discouraging investments in rupee Treasuries.

Fleeing foreign investors can give a shock to the credit system, as transactions are cleared through the domestic reserve money. When interventions are sterilized, a run can be triggered on the rupee, when private credit is strong. (Colombo/Dec02/2019)