Colombo, Sri Lanka – 30 September 2026 – The Central Bank of Sri Lanka (CBSL) has announced a significant positive shift in the nation’s external sector, with the external current account recording a surplus of US$ 133 million in August 2026. This pivotal development marks an end to four consecutive months of deficits, offering a beacon of stability amidst an challenging global economic environment.
The comprehensive report, titled “External Sector Performance – August 2026,” was released by the CBSL’s Economic Research Department today, September 30, 2026, providing crucial insights into Sri Lanka’s trade, services, and capital flows.
Key External Sector Performance Highlights (August 2026)
- Total Exports (Goods and Services): US$ 1,790 million (a 2.7% year-on-year decline)
- Tourist Earnings: US$ 264 million (a 2.1% year-on-year increase, based on revised methodology)
- Merchandise Trade Deficit: US$ 674 million
- Workers’ Remittances: US$ 749 million (a robust 10.0% year-on-year increase)
- Gross Official Reserves (end August 2026): US$ 6.9 billion (providing 3.4 months of import coverage)
- Exchange Rate (end September 2026): LKR 330.83 per USD (6.3% year-to-date depreciation)
Current Account Rebounds Driven by Lower Imports
The most notable aspect of the August 2026 performance is the external current account achieving a surplus after a prolonged period of deficits. This positive turnaround is primarily attributed to a lower trade deficit compared to previous months, a direct result of reduced import expenditure. However, the cumulative current account for January-August 2026 still shows a deficit of US$ 291 million, underscoring ongoing pressures on the external sector, particularly those stemming from the escalation of the Middle East conflict.
Trade Dynamics: Mixed Signals in Goods Trade
While the monthly current account saw a surplus, the merchandise trade deficit widened year-on-year in August 2026 to US$ 674 million. This was influenced by a 12.8% rise in import expenditure, reaching US$ 1,914 million, coupled with a 3.3% dip in export earnings, which stood at US$ 1,240 million. Cumulatively, the trade deficit for January-August 2026 expanded significantly to US$ 7.2 billion, compared to US$ 4.3 billion in the corresponding period of 2025.
Encouragingly, monthly fuel import expenditure declined for the fourth consecutive month in August 2026. Despite this, cumulative fuel imports for Jan-Aug 2026 surged by 61.6% year-on-year, amounting to approximately US$ 4.0 billion. Similarly, expenditure on motor vehicle imports, including both personal and commercial vehicles, saw a 24.2% decline year-on-year in August, though cumulative motor vehicle imports reached US$ 1,684 million for the first eight months of the year. The terms of trade deteriorated both on a monthly and cumulative basis, as import prices continued to rise faster than export prices.
Services and Tourism: Navigating Headwinds
The services account maintained a surplus of US$ 220 million in August 2026, though this represents a 24.4% reduction compared to August 2025. The cumulative services account surplus for January-August 2026 also declined by 21.4% to US$ 2.1 billion.
Tourist arrivals experienced a year-on-year decline of 3.3% in August 2026, contributing to a 2.0% cumulative decline for January-August 2026. Despite fewer arrivals, tourism earnings for August 2026 were estimated at US$ 264 million, marking a 2.1% increase from a year earlier. This estimate reflects the revised methodology implemented by the Sri Lanka Tourism Development Authority. However, cumulative tourism earnings for Jan-Aug 2026 decreased by 10.0% to US$ 2.1 billion.
Workers’ Remittances: A Robust Contribution
A consistent positive contributor to the external sector remains workers’ remittances. These inflows increased significantly by 10.0% year-on-year to US$ 749 million in August 2026. This strong trend is mirrored in cumulative remittances, which rose by 19.8% year-on-year to US$ 6.1 billion during January-August 2026. This vital source of foreign exchange continues to provide substantial support to the national economy.
Capital Flows and Strengthening Reserves
In terms of capital flows, foreign investment in the government securities market recorded a net inflow of US$ 70.2 million in August 2026, signalling some investor confidence. Conversely, the Colombo Stock Exchange (CSE) experienced a net outflow of US$ 58.1 million during the same period.
Gross Official Reserves (GOR), which include the swap facility with the People’s Bank of China (PBOC), saw an increase to US$ 6.9 billion by end-August 2026. This was bolstered by foreign exchange purchases made by the Central Bank, ensuring 3.4 months of import coverage.
Sri Lankan Rupee Performance
By the close of September 2026, the Sri Lanka Rupee (LKR) had depreciated by 6.3% against the US dollar on a year-to-date basis, reflecting ongoing market adjustments. The exchange rate stood at LKR 330.83 per USD at the end of September 2026, compared to LKR 309.99 at the end of 2025.
Conclusion
Sri Lanka’s external sector performance in August 2026 paints a complex yet cautiously encouraging picture. The return to a current account surplus is a welcome sign of stabilization, primarily driven by prudent import management. However, the nation continues to grapple with a widening cumulative trade deficit, a moderating services surplus, and a decline in tourist arrivals. The sustained growth in workers’ remittances and the strengthening of official reserves remain critical pillars supporting Sri Lanka’s external resilience as it navigates a challenging global and regional economic landscape.
Source: Read original document
