Sri Lanka expects to raise up to $1.5 billion via a sovereign bond issuance, while another $1 billion is expected from two separate syndicated loans.

Rupee forwards were active, with two-week forwards closing at 153.30/40 per dollar, compared with Thursday's close of 153.15/30.

"The rupee will stabilise with higher dollar liquidity after the inflows," a currency dealer said, asking not to be named.

"Bond yields fell around 20 basis points and foreign investors were buying bonds."

A government move to double the borrowing limit of development bonds to $3 billion in 2017 is also expected to increase liquidity.

Finance Minister Ravi Karunanayake on Thursday blamed "technical difficulties" for a two-month delay in receiving an around $160 million loan tranche from the IMF and said the disbursement was expected after June 14.

Sri Lanka has seen a rise in foreign inflows into equities and government securities since early this month, with foreign investors buying shares worth a net 13.7 billion rupees in 26 consecutive sessions through Friday.

Foreign investors have also net bought government securities worth 4.17 billion rupees in the week ended April 19, although they have net sold 58 billion rupees worth of government bonds so far this year.