Colombo, 30 September 2026 – Sri Lanka’s external sector presented a mixed performance in August 2026, with a significant widening of the trade deficit despite a notable surge in worker remittances. According to the latest “External Sector Bulletin – August 2026” released by the Central Bank of Sri Lanka (CBSL), the country’s current account balance saw a decline compared to the previous year, primarily driven by increased import expenditure.
The comprehensive report, compiled by the Economic Research Department of the CBSL, provides crucial insights into the nation’s balance of payments and overall economic health, highlighting key trends in merchandise trade, services, income accounts, and financial flows for August 2026 and the cumulative Jan-Aug 2026 period.
Current Account Balance Sees Decline in August
The Current Account Balance recorded a surplus of USD 133.4 million in August 2026, a significant reduction from the USD 375.9 million surplus recorded in August 2025. Cumulatively, for January to August 2026, the current account registered a robust surplus of USD 2,047.0 million, a remarkable turnaround from the deficit of USD 64.5 million during the same period in 2025. This annual improvement is largely attributed to the sustained growth in secondary income, predominantly worker remittances.
Merchandise Trade: Widening Deficit on Higher Imports
Sri Lanka’s merchandise trade deficit expanded to USD 673.5 million in August 2026, a considerable increase from USD 414.2 million in August 2025. The cumulative trade deficit for Jan-Aug 2026 reached USD 7,180.2 million, up from USD 4,264.2 million year-on-year, underscoring persistent challenges in the trade sector.
Export Performance
- Merchandise Exports slightly declined by 3.3% year-on-year to USD 1,240.3 million in August 2026.
- However, cumulative exports for Jan-Aug 2026 showed positive growth of 3.3%, reaching USD 9,376.9 million, compared to USD 9,076.6 million in the corresponding period of 2025.
- Key industrial export categories like Petroleum products (up 50.0% in August and 44.3% Jan-Aug) and Machinery and mechanical appliances (up 42.4% Jan-Aug) demonstrated strong performance.
- Agricultural exports remained largely stable in August, with Spices showing an impressive 83.4% growth for the month and 23.6% for Jan-Aug. However, Tea exports faced a decline of 7.8% in August and 7.6% for the cumulative period.
- Textiles and garments, a major export earner, experienced a decline of 8.4% in August and 6.7% for Jan-Aug.
Import Performance
- Merchandise Imports surged by 12.8% year-on-year to USD 1,913.8 million in August 2026.
- The cumulative import bill for Jan-Aug 2026 escalated by 24.1% to USD 16,557.1 million from USD 13,340.9 million in the previous year.
- Fuel imports were a primary driver of this increase, soaring by 76.5% in August and 61.6% for Jan-Aug 2026, reflecting higher global energy prices and increased domestic demand.
- Machinery and equipment imports also saw substantial growth, up 42.9% in August and 21.8% for Jan-Aug, indicative of ongoing investment activities.
- Consumer goods imports, particularly personal vehicles (up 83.1% Jan-Aug) and medical and pharmaceuticals (up 15.3% Jan-Aug), also contributed to the higher import expenditure.
Services and Income Accounts: Remittances Offer Strong Support
The Services Account (net) recorded a surplus of USD 220.1 million in August 2026, a 24.4% decrease from August 2025. The cumulative surplus for Jan-Aug 2026 also fell by 21.4% to USD 2,096.1 million. This decline was primarily due to higher outflows in travel services (up 62.1% Jan-Aug) and air transport (up 55.7% Jan-Aug), overshadowing the slight growth in travel inflows.
The Primary Income Account (net) showed an outflow of USD 144.4 million in August 2026, improving slightly from USD 174.5 million in August 2025. Cumulatively, net outflows for Jan-Aug 2026 were USD 1,240.8 million, an improvement of 10.3% from the previous year, mainly due to reduced interest outflows related to government and Central Bank foreign loans.
Crucially, the Secondary Income Account (net) continued its robust performance, recording a surplus of USD 731.2 million in August 2026, an 8.6% increase year-on-year. This was largely propelled by a significant 10.0% growth in worker’s remittances, reaching USD 748.6 million for the month. Cumulatively, worker remittances for Jan-Aug 2026 surged by 19.8% to USD 6,131.0 million, demonstrating the vital role of expatriate workers in supporting the external sector.
Exchange Rate Movements and International Reserves
The Sri Lanka Rupee (LKR) depreciated against the US Dollar by 6.3% between End-Dec 2023 and End-Aug 2026, settling at LKR 330.83 per USD by 30 September 2026. The LKR also depreciated against most other major currencies like the Euro, Pound Sterling, Chinese Yuan, Japanese Yen, and Australian Dollar, while appreciating slightly against the Indian Rupee (+0.2%) during 2026 (up to 30 September).
Gross Official Reserves (GOR) stood at USD 5.5 billion at the end of July 2026, providing for 3.0 months of imports. Detailed August 2026 GOR figures are yet to be finalised for quarterly estimates.
Financial Flows
Foreign Direct Investment (FDI) inflows (excluding foreign loans from unrelated parties to BOI companies) amounted to USD 405 million for the first half of 2026 (1H 2026), compared to USD 759 million in 1H 2025, indicating a slowdown. Net inflows to the Government Securities (G-Sec) market for Jan-Aug 2026 recorded a significant outflow of USD 1,093 million, a considerable reversal from net inflows of USD 441 million in Jan-Aug 2025. Similarly, the Colombo Stock Exchange (CSE) experienced net outflows of USD 166 million during the same period.
While the widening trade deficit in August 2026 poses a challenge, the robust growth in worker remittances continues to be a crucial stabilising factor for Sri Lanka’s external sector. Sustained efforts to boost exports and attract non-debt creating foreign inflows remain vital for long-term external stability.
Source: External Sector Bulletin – August 2026, Central Bank of Sri Lanka
