Rupee bonds sold in the secondary market are cleared through the domestic monetary base, putting pressure on the domestic credit and through that on the exchange rate and the general economy.
Dollar bonds however can only be sold to foreign investors or domestic parties who already hold dollars, usually invested externally.
Dollar loans can also be directly settled against foreign reserves of the Central Bank when they mature, without involving the domestic monetary base as the monetary authority in Sri Lanka functions as an agent to the Treasury.
But foreign investors will be able to buy new bonds up to 12.
5 percent of the increased total issue of Treasury bill and bonds during the year, he said.
In 2012 the Central Bank has said that 843 million US dollars flowed in to the country from the sale of gilts to foreign investors.
In a budget for 2013, the finance ministry has estimated 62 billion rupees from the sale of Treasury bills to foreign investors out of 421 billion rupees of expected total domestic financing.
This year the Treasury does not expect to go to bond markets with a dollar denominated sovereign bond.
Analysts have said that rupee bonds sold to foreign investors are considerably more risky that dollar denominated ones, in the event of a sell down by their holders.