By: Staff Writer
April 14, Colombo (LNW): Foreign investors pulled out over $28 million from Sri Lankan government securities in the week ending April 10, official data from the Central Bank of Sri Lanka revealed, as global financial markets reel from U.S. President Donald Trump’s aggressive trade policy and reciprocal tariff measures.
The outflow—amounting to 8.67 billion rupees ($28.7 million)—marks a sharp reversal after months of steady inflows into Sri Lankan treasuries. Since December 26 last year, the country had attracted 28.6 billion rupees ($95.6 million) in foreign investment into government securities.
Analysts say the sudden shift comes in the wake of market jitters triggered by President Trump’s introduction of a 145 percent tariff on Chinese imports, prompting swift retaliation from Beijing. The escalating trade standoff has rattled investors, pushing them to offload riskier emerging market assets in favor of traditional safe havens such as gold, the Swiss franc, and Japanese yen.
“The volatility caused by global trade tensions is making foreign investors more cautious,” a market analyst said. “We’re seeing them pull capital out of places like Sri Lanka and redirect it to low-risk environments.”
Despite Sri Lanka’s deflationary policies and import restrictions—both of which had supported modest capital inflows in recent months—the outflow underscores the country’s vulnerability to external shocks.
As of December 26, 2024, foreign holdings in government securities stood at 69.3 billion rupees. Within just 15 weeks, the country had attracted 29.9 billion rupees in fresh foreign investments into treasury bills and bonds, signaling renewed investor interest at the time.
However, the momentum appears to have stalled. The latest weekly data shows that global uncertainty is now outweighing the appeal of local policy measures.
Sri Lanka recorded foreign outflows totaling 48.2 billion rupees from government securities in 2024. Alarmingly, in the first nine months of that year alone, the country saw capital flight worth 78.1 billion rupees—66 percent of which came from treasury instruments.
Economists warn that while short-term inflows offer a temporary boost, sustained foreign investment requires structural reforms and long-term economic stability. The current trend suggests Sri Lanka remains at the mercy of global forces, underscoring the need for deeper resilience in its economic framework.
