Colombo, Sri Lanka – 31 August 2026 – The Central Bank of Sri Lanka (CBSL) has released its External Sector Bulletin for July 2026, offering a comprehensive overview of the nation’s external sector performance. While the country recorded a current account deficit for the month of July, a significant cumulative surplus for the first seven months of 2026 underscores resilience, largely driven by robust worker remittances, even as the merchandise trade deficit widened considerably.
Current Account: Monthly Deficit Contrasts with Strong Cumulative Surplus
The External Sector Bulletin reveals a current account deficit of USD 142.0 million in July 2026, a notable shift from the USD 226.7 million surplus recorded in July 2025. However, a more encouraging picture emerges for the cumulative period of January to July 2026, which posted a substantial surplus of USD 1,671.1 million. This marks a dramatic improvement compared to the USD 162.6 million deficit registered during the same period in the previous year, highlighting the overall positive trajectory of Sri Lanka’s external accounts year-to-date.
Merchandise Trade: Widening Deficit on Import Surge
Sri Lanka’s merchandise trade deficit expanded significantly in July 2026 to USD 1,017.6 million, up from USD 580.0 million in July 2025. The cumulative trade deficit for January-July 2026 also saw a considerable widening, reaching USD 6,506.7 million compared to USD 3,850.1 million in the corresponding period of 2025.
Export Performance: Mixed Results with Cumulative Growth
Merchandise exports experienced a slight contraction of 5.3 percent year-on-year in July 2026, amounting to USD 1,233.4 million. Despite this monthly dip, cumulative exports for January-July 2026 demonstrated healthy growth, increasing by 4.4 percent to USD 8,136.6 million.
Key sectors contributing to this cumulative growth include:
- Petroleum products: Surged by 43.6 percent.
- Machinery and mechanical appliances: Saw an impressive 49.2 percent increase.
- Spices: Grew by 13.5 percent.
- Coconut products: Recorded a 10.7 percent rise.
Conversely, some traditional export earners faced headwinds, with Tea exports declining by 7.5 percent and Textiles and garments by 6.4 percent during the cumulative period.
Import Performance: Fuel and Vehicle Imports Drive Surge
Merchandise imports witnessed a substantial increase of 19.6 percent year-on-year in July 2026, reaching USD 2,251.0 million. The cumulative import bill for January-July 2026 rose by a significant 25.8 percent to USD 14,643.2 million, indicating increased demand within the economy.
Major contributors to the import surge were:
- Fuel: Imports soared by 59.9 percent.
- Personal vehicles: Experienced a massive 127.7 percent increase.
- Machinery and equipment: Rose by 19.1 percent.
In contrast, imports of Vegetables and Sugar and confectionery saw declines.
Services Account: Declining Net Inflows and Tourism Headwinds
The net services account contracted by 23.0 percent in July 2026 to USD 244.0 million, and by 22.4 percent cumulatively for January-July 2026, reaching USD 1,842.7 million. This decline was largely influenced by a significant drop in Travel (tourism) inflows, which fell by 11.5 percent to USD 1,796.7 million during Jan-Jul 2026, indicating ongoing challenges in the tourism sector’s recovery. Services outflows, particularly in Air transport and Travel, also increased.
Secondary Income: Workers’ Remittances Remain a Strong Pillar
A bright spot in the external sector performance is the robust growth in the Secondary Income Account, primarily driven by workers’ remittances. The net secondary income increased by 11.1 percent in July 2026 to USD 766.3 million. Cumulatively, for January-July 2026, it surged by 21.9 percent to USD 5,305.8 million, with workers’ remittances alone contributing USD 5,382.4 million, a 21.4 percent increase year-on-year. This vital inflow continues to provide substantial support to Sri Lanka’s external liquidity.
Exchange Rate Movements
As of 31 August 2026, the Sri Lanka Rupee (LKR) depreciated against major international currencies such as the US Dollar (-5.5%), Euro (-4.3%), Pound Sterling (-6.1%), Chinese Yuan (-9.1%), Japanese Yen (-3.5%), and Australian Dollar (-11.7%) since December 2023. However, the LKR showed a marginal appreciation of 0.4 percent against the Indian Rupee during the same period.
Financial Flows and International Reserves
The bulletin also provides insights into financial flows, highlighting the level of Gross Official Reserves (GOR) and reserve adequacy in terms of months of imports. Foreign Direct Investment (FDI) and net inflows to the government securities market and Colombo Stock Exchange (CSE) are also critical components monitored by the CBSL.
Outlook
The July 2026 External Sector Bulletin presents a mixed but overall stable picture for Sri Lanka’s external accounts. While a widening merchandise trade deficit and a dip in tourism receipts pose challenges, the strong cumulative current account surplus, largely bolstered by buoyant worker remittances, provides a crucial buffer. Policymakers will likely continue to monitor these trends closely to ensure external sector stability and support sustainable economic growth.
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