Sri Lanka’s external sector continued to demonstrate resilience in the first seven months of 2025, with the current account maintaining consistent monthly surpluses despite a widening merchandise trade deficit, the Central Bank of Sri Lanka (CBSL) reported.
The current account surplus reached USD 1.7 billion during January–July 2025, a 36.5% increase from USD 1.2 billion in the same period last year, driven by robust export growth, higher workers’ remittances, and improved earnings from services and tourism.
Despite the overall surplus, the merchandise trade deficit widened to USD 3.8 billion, up 22.5% from USD 3.1 billion a year earlier, reflecting a surge in imports. Imports grew 11.8% year-on-year to USD 11.64 billion, while merchandise exports rose 7.1% to USD 7.8 billion over the same period.
June 2025 alone highlighted this trend, with imports totaling USD 1.68 billion, a 16.3% increase, compared to exports of USD 1.14 billion, widening the monthly trade gap to USD 540 million.
Vehicle imports also contributed to import pressures, totaling USD 668 million during the first seven months, including USD 193 million in July alone.
The CBSL noted a deterioration in terms of trade in July 2025, as import prices rose faster than export prices, while the Sri Lankan rupee depreciated 3.3% year-to-date against the US dollar.
On the positive side, the services sector continued to support external inflows, with net earnings rising 3.3% to USD 2.4 billion for January–July.
Tourism has been a significant contributor, with 200,244 tourist arrivals in July, a 6.6% increase compared to July 2024, generating USD 318 million in earnings for the month and USD 2 billion for the seven-month period.
Workers’ remittances reached USD 697 million in July, marking the highest monthly inflow since December 2020.
However, foreign investment activity remained mixed. Net inflows persisted in government securities, but the Colombo Stock Exchange (CSE) experienced a net outflow, reflecting investor caution amid ongoing political and economic uncertainties.
Gross official reserves, including the swap facility with the People’s Bank of China, held steady at USD 6.1 billion at the end of July, despite ongoing debt servicing obligations.
IMF benchmarks emphasize that sustaining these inflows requires sound macroeconomic management, fiscal consolidation, and political stability.
While current surpluses indicate short-term resilience, maintaining external sector stability will depend on continued export growth, stronger tourism recovery, and disciplined import management, alongside policies to attract foreign direct investment.
Analysts warn that widening import bills and currency pressures could undermine these gains if structural and political reforms are not effectively implemented.
The CBSL’s latest data suggests that while Sri Lanka’s external position is on a relatively firm footing, ongoing vigilance and policy coordination are critical to ensure that the current account surpluses translate into durable economic stability and compliance with IMF sustainability benchmarks.
