Sri Lanka's Central Bank generates 10 Bn in 2026 money

Official data reveals that Sri Lanka's central bank has printed 10 billion rupees in 2026 currency through the direct acquisition of Treasury bonds from the secondary market. This action was taken amid a prohibition on direct purchases through auctions as per the prevailing law.

The central bank executed the purchase of 5 billion rupees in 01 June 2026 bonds at a rate as low as 17.31 percent, infusing permanent rupee reserves into banks. Additionally, the bank acquired 5 billion rupees of 01 August 2026 bonds at a rate of 13.72 percent.

This injection of newly minted money empowers banks and primary dealers to extend credit or acquire other bonds without the necessity of raising deposits from the economy.

Historically, the central bank had routinely purchased maturing bonds in the primary market for over half a century, attributing deficits to mis-targeted rates. However, public opposition emerged in 2004, leading to a voluntary halt of this practice after 2015.

Despite this, currency crises in 2015/16 and 2018 prompted the central bank to resort to measures such as overnight reverse repo, term reverse repo, outright purchases, and creating new money through dollar-rupee swaps once the original avenue was blocked in a self-imposed practice.