The dollar recovered against its major peers after taking a battering the previous day
Sri Lanka announced Wednesday it would raise $1.5 billion through a domestic bond sale this year as it moves to rebuild its foreign exchange reserves.
The cabinet approved the borrowing through dollar-denominated bonds to be offered to banks and investors in the country, said government spokesman Gayantha Karunatileka.
The move to borrow locally came weeks after the International Monetary Fund (IMF) warned that the country's foreign reserves were "below comfortable levels".
Last June the government, which came to power in January 2015, received a $1.5 billion bailout from the IMF after facing a balance of payments crisis.
The IMF, in a November review before releasing the second tranche of the funds, said Sri Lanka's performance was "broadly satisfactory" but that it needed to build its dwindling foreign reserves.
Foreign reserves at the end of December were $6.06 billion, up from $5.64 billion a month earlier, according to government data.
Sri Lanka in December also secured a three year $1.34 billion loan from the World Bank to fund a range of projects.
It is also selling part of a loss-making $1.4 billion harbour to a Chinese company to help repay crippling debts.