Sri Lanka's president on Saturday bowed to pressure from activists and replaced the country's controversial central bank chief, appointing a respected economist to the top job.

President Maithripala Sirisena announced that Indrajit Coomaraswamy, 66, had been appointed as the new governor of the central bank, effective immediately.

Coomaraswamy was previously a director of economic affairs at the Commonwealth Secretariat, an intergovernmental agency of Commonwealth countries in London.

"After consulting all parties concerned, I appointed top economist Dr. Indrajit Coomaraswamy to lead the Central Bank of Sri Lanka," the president posted on Twitter.

The announcement ended any prospect of outgoing governor Arjuna Mahendran being reappointed after his tenure ended on Thursday. He had indicated he was prepared to complete another term.

Sirisena had come under intense pressure not to reappoint Mahendran, who had faced allegations of insider trading.

A group of Sri Lankan academics and professionals had gone to court to demand action against Mahendran, a Singapore national of Sri Lankan origin.

Activists had threatened to take to the streets unless the president replaced him.

He was accused last year of leaking inside information to his son-in-law's firm, allegedly allowing it to make millions of dollars in profits from a central bank bond auction.

Mahendran has consistently maintained his innocence.

Sri Lanka's economy is under stress and last month began receiving the first tranche of a $1.5 billion bailout from the International Monetary Fund.