Foreign selling of Sri Lanka’s stocks and bonds top $ 800mn as constitutional crisis drags on

December 3, 2018 (LBO) – Foreign selling of Sri Lanka’s stocks and bonds continues at a brisk pace in 2018 with net foreign outflows topping Rs145bn (US$800mn).

Since the constitutional crisis began just over one month ago, approximately Rs45bn (US$250mn) has fled Sri Lanka’s local stock and bond markets. The currency has been adversely impacted leaving it near record lows of Rs180/dollar. These lows are despite the rebound in emerging market currencies in recent weeks.

With the crisis dragging on and government machinery slowing to a snails pace, the economic impact is being felt in many sectors of the Sri Lankan economy. This downturn has been offset by favourable weather allowing the increase in hydropower generation and agricultural production.

If the crisis continues to linger on, many experts are expecting the economic downturn to accelerate. The downturn comes amidst what would have otherwise been a strong quarter for the economy due to favourable weather and peak tourist activity.