Thursday Apr 02, 2026
Thursday Apr 02, 2026
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| Current account balance (Source: CBSL) |
Sri Lanka’s current account surplus declined 68% year-on-year (YoY) to $ 117.2 million in February, which was also down 68% from January, with import growth outpacing exports. The current account surplus was up 3.8% YoY to $ 486.9 million for the first two months of the year.
The deteriorating external sector performance in February is a concern, with the Middle East war broke out on 28 February. Through March, the conflict is affecting Sri Lanka beginning with energy and extending across the wider economy.
Higher global oil prices have increased domestic fuel costs, feeding into transport, logistics, food distribution and inflation. Supply chain disruptions and higher freight and insurance costs are raising import bills, while exports face pressure from weaker demand and rising shipping costs. Tourism has also been affected, with higher airfares and flight disruptions weighing on arrivals and leading to cancellations estimated at $ 80–100 million a month.
Risks also extend to remittances and food prices due to disruptions in trade and labour markets in the Middle East. These pressures are expected to persist, with elevated energy costs and supply disruptions weighing on growth and the external sector.
According to data released by the Central Bank of Sri Lanka (CBSL) yesterday, the merchandise trade deficit expanded 88% YoY to $ 776 million in February 2026, with exports up a marginal 0.5% to $ 1.05 billion and imports increasing 25.2% to $ 1.83 billion.
The trade deficit for the first two months of the year increased 25% YoY to $ 1.43 billion, with import growth at 12% to $ 3.6 billion outpacing exports, which grew 4.8% to $ 2.2 billion.
Vehicle imports, including personal and commercial vehicles, amounted to $ 194 million in February, down from $ 224 million in January 2026, and even lower compared to $ 301 million in December 2025. Cumulative vehicle imports for the first two months of 2026 amounted to $ 418 million.
The terms of trade deteriorated on a YoY basis in February 2026, as the decline in export prices exceeded the decline in import prices. The terms of trade during January-February 2026 also deteriorated compared to the corresponding period of the previous year, CBSL noted.
The surplus in the services account declined 16.7% YoY in February 2026 to $ 340 million, reflecting reduced inflows from major service categories, including earnings from tourism, alongside higher overseas travel-related outflows.
Tourist arrivals in February 2026 increased on a month-on-month (MoM) basis, while recording a growth of 16.3% YoY. However, tourism earnings were estimated at $ 352 million in February 2026, down 4.2% YoY, while cumulative earnings recorded a 4.9% decline to $ 730 million during the first two months of the year.
Tech-related services exports fell 20% YoY to $ 50 million, while logistics-related inflows declined 26.8% to $ 123.7 million in February. For the first two months of 2026, the two segments registered inflows of $ 116.5 million (down 8.6% YoY) and $ 308 million (down 8.5%), respectively.
Workers’ remittances in February 2026 sustained the positive momentum observed in recent months, growing 33% to $ 729 million in February. Cumulatively, remittances during the first two months of the year recorded a growth of 32% YoY to $ 1.48 billion.
Foreign investments in Government securities recorded a net inflow of $ 53 million, while foreign investments in the Colombo Stock Exchange (CSE), including both primary and secondary market transactions, recorded a net outflow of $ 30 million in February.
CBSL said gross official reserves, including the swap facility with the People’s Bank of China (PBOC), increased to $ 7.3 billion as of end-February 2026. This was mainly driven by higher foreign exchange purchases by the Central Bank, despite continued external debt service payments, the CBSL said.
“As of end-March 2026, the year-to-date (YTD) depreciation of the Sri Lanka rupee against the US dollar was 1.6%, reflecting the emergence of external sector pressures following the onset of the Middle East conflict in late February 2026,” the CBSL noted.
For 2025 as a whole, the current account recorded a provisional surplus of $ 1.73 billion, up 43.8% from $ 1.21 billion in 2024. The merchandise trade deficit widened to $ 7.9 billion in 2025 from $ 6.07 billion in 2024, as imports rose 14% to $ 21.48 billion, while exports increased 6.3% to $ 13.58 billion. Workers’ remittances reached a record $ 8.08 billion in 2025, up 22.8%, while net services inflows rose 7.9% YoY to $ 3.71 billion. Gross official reserves increased by $ 702.8 million during 2025.
