Sri Lanka’s external current account recorded a deficit of US$142 million in July, extending its deficit for a fourth consecutive month amid the impact of developments in the Middle East, according to the Central Bank of Sri Lanka (CBSL).
The latest data from the Central Bank’s Economic Research Department showed that the cumulative current account deficit reached US$387 million during the first seven months of 2026, compared with a surplus during the corresponding period last year.
The country’s merchandise trade deficit also widened significantly, reaching US$6.5 billion during January-July 2026, compared with US$3.9 billion during the same period in 2025.
The wider trade deficit was driven by increased import expenditure alongside lower export earnings.
Fuel imports surge
Sri Lanka spent US$453 million on fuel imports in July, marginally lower than the US$465 million recorded in June. However, fuel import expenditure increased by 68% year-on-year, largely due to higher spending on crude oil imports.
Cumulative fuel import expenditure reached approximately US$3.62 billion during the first seven months of the year, marking a 59.9% increase compared with the corresponding period of 2025.
Motor vehicle imports also continued to account for a significant share of import expenditure. Spending on personal and commercial vehicle imports amounted to US$241 million in July, bringing cumulative expenditure on vehicle imports to US$1.495 billion during January-July.
The Central Bank said Sri Lanka’s terms of trade deteriorated in July compared with a year earlier, as import prices increased at a faster rate than export prices. The terms of trade also weakened during the first seven months of the year compared with the same period in 2025.
Services surplus falls
Sri Lanka’s services account recorded a surplus of US$244 million in July, down 23% from a year earlier. However, the monthly surplus increased by 50.7% compared with June, mainly due to higher tourism earnings.
Despite the month-on-month improvement, the cumulative services account surplus declined by 22.4% year-on-year to US$1.8 billion during January-July.
Tourist arrivals fell marginally by 1.7% year-on-year in July. A total of 1,343,418 tourists visited Sri Lanka during the first seven months of 2026, compared with 1,368,288 arrivals during the corresponding period of 2025.
Tourism earnings were estimated at US$286 million in July, a 10.3% decline from the same month last year. However, earnings increased sharply by 88.9% compared with June.
Cumulative tourism earnings during January-July declined by 11.5% year-on-year to US$1.8 billion.
Remittances provide support
Workers’ remittances continued to provide significant support to Sri Lanka’s external sector, increasing 11.5% year-on-year to US$778 million in July.
Total remittances during the first seven months of 2026 rose 21.4% to US$5.4 billion compared with the corresponding period of 2025.
Foreign investment also recorded mixed movements during July. Investments in government securities generated a notable net inflow of US$159.4 million, while foreign investment in the Colombo Stock Exchange recorded a marginal net outflow of US$6.3 million, including both primary and secondary market transactions.
Reserves at US$6.6 billion
Gross official reserves, including the swap facility with the People’s Bank of China, stood at US$6.6 billion at the end of July.
The Central Bank said the reserve position was supported by foreign exchange purchases by the Central Bank.
Meanwhile, the Sri Lankan rupee had depreciated by 5.5% against the US dollar on a year-to-date basis by the end of August.
The latest figures highlight continued pressure on Sri Lanka’s external position, particularly from the widening merchandise trade deficit and higher fuel import costs, while stronger worker remittances and foreign inflows into government securities provided some support.
