- Rise due to festive demand; expected to ease in early 2026: Treasury
The Sri Lankan Rupee (LKR) continued its steady weakening against the US Dollar (USD), with the indicative USD/LKR spot exchange rate rising to Rs. 308 per USD in late November, up from Rs. 291 per USD at the end of 2024, according to Central Bank of Sri Lanka (CBSL) statistics.
According to the data, the indicative rate, a weighted average of all USD/LKR spot transactions in the domestic inter-bank market, including CBSL interventions via the Request for Quote (RFQ) method, shows smooth and low-volatility movements throughout the year.
After minor stabilisation between May and August near the 300 mark, the rupee gradually weakened, with the most noticeable firming of the USD occurring in the final quarter of 2025.
Treasury Deputy Secretary A.K. Seneviratne explained that the recent rise in the exchange rate was driven by higher demand during the festive season, but noted that he expected a decline in the early months of next year as demand eased.
“There won’t be a major issue. The usual inflation will prevail, but the current demand will decrease within the next few months,” Seneviratne told The Sunday Morning.
He also said that Sri Lanka would issue a $ 50 million Domestic Dollar Bond (DDB) next week, the first foreign currency borrowing instrument since the 2022 default and the first under the newly-formed Public Debt Management Office (PDMO).
The bond, part of a Cabinet-approved plan to raise up to $ 100 million, will be auctioned on Wednesday (3 December), with bids opening tomorrow (1 December) for locally incorporated licensed commercial banks. The bond will have one-, two-, and three-year maturities, with a minimum investment of $ 1 million payable to the CBSL’s account at the Federal Reserve Bank of New York.
The DDB is designed to mobilise existing domestic dollar liquidity, avoiding international markets. It follows the suspension of Sri Lanka Development Bonds (SLDBs) in 2023 and their subsequent conversion into rupee Treasury bonds under the Domestic Debt Optimisation (DDO) programme.
The PDMO, established in January 2024, now oversees all public debt management functions, playing a crucial role in International Monetary Fund (IMF) programme compliance and restoring market access. The Cabinet has also approved new regulations empowering the PDMO to manage Government securities more directly.
According to Seneviratne, with the combination of IMF and Asian Development Bank (ADB) funds, the country expects to raise nearly $ 650 million in total in the coming months.