External sector posts strong 1H despite widening trade deficit

• Current account posts $ 1.5 b surplus in 1H 2025, up 30.2% YoY; driven by strong exports, tourism, services and remittances
• Merchandise trade deficit widens 28.7% to $ 3.27 b amid higher imports
• Imports rise 12.5% YoY to $ 9.76 b; June imports alone at $ 1.68 b
• June trade deficit grows to $ 540 m vs. $ 370 m in June 2024
• Vehicle imports hit $ 475 m in 1H; June total at $ 163 m
• China, India and UAE remain top import sources; terms of trade improve as import prices fall more than export prices

Sri Lanka’s external sector remained robust in the first half of 2025, with the current account registering consistent monthly surpluses despite a widening of the merchandise trade deficit, the Central Bank of Sri Lanka (CBSL) reported.

In its latest external sector data released, the CBSL highlighted that the current account registered a surplus of $ 1.5 billion during the first six months, up 30.2% from $ 1.1 billion in the same period last year, with robust export growth, higher workers’ remittances, and improved earnings from services and tourism.

Merchandise trade dynamics showed signs of pressure as the trade deficit widened in June 2025 compared to the same month in 2024, mainly due to a sharper increase in imports relative to exports. 

Imports grew by 12.5% year-on-year (YoY) to $ 9.76 billion, compared to $ 8.68 billion a year earlier. As a result, the merchandise trade deficit widened from $ 2.54 billion to $ 3.27 billion, marking a 28.7% increase.

In June alone, imports amounted to $ 1.68 billion, up 16.3% YoY, while exports for the month stood at $ 1.14 billion. The monthly trade deficit in June 2025 reached $ 540 million, considerably higher than the $ 370 million deficit in the same month in 2024.

The CBSL added that vehicle imports also saw a notable rise. In June alone, imports of both personal and commercial vehicles amounted to $ 163 million, bringing the cumulative total for the first half of the year to $ 475 million. 

Meanwhile, China, India, and the United Arab Emirates (UAE) remained Sri Lanka’s primary sources of imports throughout this period.

Although both import and export prices declined in June 2025, the country’s terms of trade improved, as the drop in import prices outpaced the fall in export prices. 

The services sector emerged as a strong performer, generating net inflows of $ 2.1 billion during the first half of the year—an 8.1% increase compared to the same period in 2024. 

This was further supported by steady growth in tourism, with earnings estimated at $ 1.7 billion, marking a 10% YoY rise and building on the recovery that began in 2024. Workers’ remittances provided a major boost to the external account, increasing by 18.9% YoY to $ 3.7 billion during the first half of 2025, compared to $ 3.1 billion during the same period in the previous year.

However, foreign investment activity presented a mixed picture. The Government securities market attracted a net inflow of $ 90 million, while the Colombo Stock Exchange experienced a net outflow of $ 39 million across both primary and secondary markets.

Despite ongoing debt service obligations, Sri Lanka’s gross official reserves stood at $ 6.1 billion by the end of June 2025, inclusive of the swap arrangement with the People’s Bank of China. However, pressures on the exchange rate persisted, with the Sri Lankan rupee recording a year-to-date depreciation of 3.2% against the US dollar as of end July 2025.