The Central Bank of Sri Lanka (CBSL) was a net buyer of a record $ 579 million worth of foreign currency from the domestic market in August, the highest single-month purchase since January 2025, as an increasingly stable rupee allowed the monetary authority to accumulate reserves rather than run them down to defend the currency.
The August figure surpassed the previous highs of $ 461 million in February 2026, and $ 356 million in August 2025. It brought net dollar purchases for the first eight months of 2026 to over $ 1.48 billion, against net purchases of $ 2 billion for the whole of 2025.
The scale of buying marks a departure from the pattern seen in Sri Lanka’s previous balance of payments (BOP) crises, when the CBSL was typically a net seller of dollars, drawing down its foreign reserves to prop up the rupee and prevent a disorderly depreciation.
That approach repeatedly left reserves depleted and the currency under renewed pressure once intervention capacity was exhausted. This time, sustained net buying suggests the CBSL has had the space to add to reserves even while absorbing external shocks, rather than being forced into defensive selling.
Those shocks were significant during the year. The rupee’s year-to-date (YTD) depreciation against the US dollar widened sharply from a marginal 0.2% appreciation at end-February 2026 to a 1.6% depreciation by end-March and 2.9% by end-April, as the escalation of the conflict in the Middle East in late February triggered external sector pressures. The depreciation deepened further to 5.4% by end-May and peaked at 7.9% by end-June.
Since then, the currency has recovered ground. The YTD depreciation eased marginally to 7.8% by end-July before narrowing further to 5.5% by end-August, even as external pressures from the Middle East conflict persisted. The rupee had depreciated by 5.6% against the dollar over the whole of 2025.
The CBSL’s net dollar purchases were not uniform throughout the year. It was a net seller in April and May, offloading $ 12.9 million and $ 211.3 million, respectively, coinciding with the period of sharpest currency depreciation. Buying resumed from June, with net purchases of $ 70.5 million, before accelerating to $ 348.6 million in July and the record $ 579 million in August as the rupee stabilised.