The Cabinet of Ministers has passed a proposal allowing the International Finance Corporation (IFC), a unit of the World Bank Group, to sell rupee bonds in the international market.
The proceeds of the bond sales will be used for lending in Sri Lanka.
The government has so far been issuing dollar bonds for major financing needs and foreigners have shown an appetite for Sri Lankan sovereign debt.
The latest sovereign bond of US $ 1.5 billion was oversubscribed by 7.5 times this May, attracting interest in excess of US $ 11 billion.
The proposal to issue rupee bonds overseas was made by the IFC and was forwarded to the cabinet by Finance and Mass Media Minister Mangala Samaraweera.
The cabinet decision is contingent upon the approval from the Central Bank and other relevant institutions.