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Sunday, November 15 2026
Sunday, November 15 2026
MONETABRIEF – Foreign investors continued to exit from Sri Lanka rupee bonds, taking their holding down to 179 billion rupees in the week to November 12, down from 184.8 billion a week earlier, central bank data showed.
Foreign investors bought into rupee bonds heavily from July to September 2026 and the central aggressively resisted appreciation buying dollar with printed money (monetizing the balance of payments) in a de facto pegged exchange rate.
However, the monetary authority does not sell when the excess liquidity is demanded by the market, showing deep depreciation and inflation bias, but sometime continue to purchase dollars hitting the currency.
Then monetary authority buys dollar to debase the rupee ostensibly to build reserves, but keeps excess liquidity in banks, and dishonors them when they are used, either for capital flight or imports.
The resulting inflation then hits the people, and public discontent builds up against a democratically elected government.
From 2015 in particular, the central bank had aggressively depreciated the rupee using discretionary policy with a depreciation bias, claiming that it is operating a 'flexible' exchange rate effectively allowing a state agency with monopoly powers to run unpredictable policy.
Sri Lanka's rupee collapsed in 2026 amid a budget surplus. Sri Lanka has had aggravated social unrest, civil strife and authoritarianism from the 1980s after the rupee was depreciated in the wake of the IMF's Second Amendment to its articles.
Foreign investors not only do not buy rupee bonds but are also wary of buying equity, in the face of the depreciation.
Many Sri Lankans are living on the edge and poor families are going without meals after macro-economists busted the currency in 2022, and they do not have 'buffers' to absorb the inflation bias of the monetary authority. (Colombo/Nov15/2026)
| 3 month bill | 9.26% | 1bp ▲ |
| 12-m bill | 9.95% | 2bp - |
| Gold (Ounce) | $4015 | - ▼ |
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