Sri Lanka sees rising foreign investment amid budget deficit

Sri Lanka is experiencing mixed economic signals as it continues its recovery following the 2022 financial crisis. While foreign investor confidence is rising, recent fiscal data shows a temporary setback in the national budget.

Foreign investors have been net buyers of Sri Lankan rupee-denominated government securities for thirteen consecutive weeks, with cumulative purchases reaching approximately Rs 92 billion (US$280 million) since June. This trend suggests growing international trust in the country’s macroeconomic stability and debt restructuring efforts.

Additionally, the Central Bank of Sri Lanka reported a 19.8 percent surge in foreign remittances. This increase indicates that expatriate workers are increasingly using formal banking channels, providing a vital source of foreign exchange to support the country’s balance of payments.

However, the government recorded a budget deficit of approximately Rs 119.23 billion in July, which reversed a cumulative surplus held during the first half of the year. Despite this monthly deficit, overall fiscal performance for the first seven months of the year remains stronger than the previous year, supported by increased tax revenues and a positive primary balance.