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.

Sri Lanka welcomed 198,235 tourists in August 2025, reflecting a 20.4% year-on-year increase. On the surface, the figures suggest growth, yet the reality for the island’s tourism industry is far less encouraging. Arrivals fell short of the official monthly target of 249,019, meeting only 79.6%, and lagged behind July’s 200,244 and August 2018’s 200,359, signaling that momentum is softening at a critical point in the year.

Cumulative arrivals for 2025 now total over 1.56 million, registering 13% YoY growth. However, reaching the ambitious target of 3 million visitors by December would require an additional 1.43 million tourists in just four months. Monthly arrivals would need to average roughly 358,000—a nearly 81% jump from August levels and far above historical peaks. Even with the upcoming winter season, analysts warn this is an increasingly unlikely scenario.

Weekly data from August illustrates a front-loaded boost from the Kandy Esala Perahera festival, which drew over 54,000 tourists in the first week. Subsequent weeks saw declines to 44,400 and 46,400, highlighting how temporary spikes fail to sustain momentum. Daily averages of 6,395 tourists, while higher than last year, remain insufficient to close the growing gap with annual targets.

Source markets remain highly concentrated, with India accounting for 23.4% of August arrivals, followed by the UK, Germany, China, and Italy. Year-to-date, India continues to dominate with over 325,000 arrivals, underscoring an over-reliance on a few key markets. Stakeholders warn that this narrow focus, coupled with inconsistent visa policies and delays in global marketing campaigns, leaves the industry vulnerable.

The government’s heavy-handed approach to governance, particularly its crackdown on alleged corrupt politicians, has compounded challenges. While President Anura Kumara Disanayake recently established a Presidential Task Force to implement a five-year

Sri Lanka Tourism Development Program, industry insiders note that the timing is too late to materially influence 2025’s performance. Delays in critical initiatives, including the nation branding campaign and visa facilitation reforms, continue to hamper industry confidence.

Analysts warn that unless these initiatives move from policy announcements to tangible, high-impact actions, the winter peak could represent a missed opportunity rather than a turning point. Even under optimistic scenarios, achieving the 3 million visitor target now appears increasingly aspirational.

Beyond short-term targets, experts caution that the current environment risks longer-term damage to Sri Lanka’s tourism brand. Policy unpredictability, slow implementation, and bureaucratic delays send mixed signals to international investors and travellers alike, undermining confidence in the country as a stable and welcoming destination.

For many tourism operators, the worry extends beyond 2025: the combination of a restrictive political climate and inconsistent government policies threatens the industry’s competitiveness and could have lasting implications for Sri Lanka’s position in the global travel market.

Sri Lanka’s electric vehicle (EV) sector is facing fresh turmoil as the National People’s Power (NPP) government detained nearly 1,000 BYD Atto 3 cars this week over alleged tax irregularities linked to motor capacity. The move has sparked confusion among consumers, importers, and industry watchers, raising serious questions about the government’s approach to regulation and its impact on ordinary citizens.

Authorities cited that the BYD Atto 3 imported with a 100kW motor in Sri Lanka is sold with a 150kW motor in Australia and Thailand. While the government claims this affects tax classification, critics say the real issue lies in inconsistent enforcement. A previous shipment faced similar scrutiny but was cleared only after a court ruling, leaving buyers and businesses uncertain about compliance rules.

The problem extends beyond BYD. Other EV brands, including Deepal, Tata, MG, GAC, and Dongfeng, also offer models in Sri Lanka with lower power outputs than those sold overseas. Examples include the Deepal S07 with 99kW locally versus 160kW in Australia, the Tata Currve with 98kW locally versus 123kW abroad, and the GAC Aion Y with 100kW here versus 150kW internationally.

Customs Director General Seevali Arukgoda announced a committee will be appointed this week to conduct tests on detained vehicles. While officials insist the review will ensure compliance, importers and buyers are already facing delays, financial losses, and uncertainty about their purchases. For the average consumer, this means delayed access to greener, more affordable vehicles and frustration over lack of clear government guidance.

Industry analysts warn that Sri Lanka’s unclear and shifting policy approach is undermining public trust. EV makers often release the same model with multiple outputs in different markets for pricing, tax, or range optimization reasons, a practice well-known globally. Without clear local regulations reflecting these realities, consumers bear the brunt, left in limbo while the government figures out its stance.

For a country seeking to cut fuel imports, promote cleaner transport, and meet climate commitments, policy inconsistency comes at a high cost to the public. Citizens and businesses alike are left questioning why governance delays continue to impede access to modern technology, leaving the EV market—and the public’s interests stuck at customs.

Arugam Bay in the Pottuvil division of the Ampara district has become the most popular destination among tourists visiting Sri Lanka, according to Pottuvil Divisional Secretary M.A.C. Ahamed Nazeel.

Currently, around 3,000 foreign tourists are staying in the coastal town, with numbers steadily increasing as the peak surfing season progresses. The surfing season, which runs from April to October, is marked by predominantly offshore winds that create ideal conditions for surfers from across the globe.

Beyond its world-renowned surf, Arugam Bay offers a range of attractions. Just two kilometres inland lies the scenic Pottuvil Lagoon, where boat tours are popular with visitors. From May to September, tourists also flock to the bay for off-shore dolphin viewing, which coincides with the high season.

Twelve kilometres south of Arugam Bay is Panama, the last inhabited village before Yala East National Park, known for its rich birdlife. The region’s diverse natural attractions complement Arugam Bay’s sweeping sandy beach at Ulla village, a year-round spot for swimming.

Located 320 km from Colombo, Arugam Bay is accessible via Moneragala, with a travel time of about seven hours by road.

Deputy Defence Minister Major General Aruna Jayasekara (Retd) visited Abhimansala-3 in Pangolla, Kurunegala, and Abhimansala-1 in Anuradhapura on August 29 and 30, reaffirming the Government’s commitment to the welfare of differently-abled War Heroes.

Established by the Sri Lanka Army, the Abhimansala Centres provide lifelong healing and rehabilitation for soldiers injured in service to the nation. The facilities offer medical consultations, prosthetic and orthotic support, physiotherapy, and mental health counseling, ensuring holistic care and dignity for residents.

During the visits, the Deputy Minister personally engaged with War Heroes, listening to their experiences and assuring them of the Ministry’s continued support. His compassionate approach reflected the Government’s recognition of their immense sacrifices in safeguarding national peace and security.

He also held discussions with officials overseeing rehabilitation operations, reviewing current services and stressing the importance of continuous improvements to elevate standards of care.

The visits, joined by Women and Child Affairs Deputy Minister Dr. Namal Sudarshana, MPs Prof. Sena Nanayakkara and Nimal Palihena, underscored the Ministry of Defence’s vision of sustained care and rehabilitation—honouring War Heroes with dignity, compassion, and enduring support.

Gold prices soared to an all-time high on Tuesday (Sep 2), driven by expectations of a U.S. Federal Reserve rate cut and a weaker dollar, which boosted demand for the precious metal.

Spot gold climbed 0.3 per cent to US$3,487.55 per ounce as of 6.33am GMT (2.33pm Singapore time), after touching a record US$3,508.50 earlier in the session. U.S. gold futures for December delivery rose 1.2 per cent to US$3,557.80. So far in 2025, bullion has rallied 32 per cent.

“A weaker economic backdrop and expectations of U.S. rate cuts are boosting precious metals,” said Kyle Rodda, analyst at Capital.com. He added that a “confidence crisis in dollar assets” stemming from President Donald Trump’s criticism of the Fed has further lifted gold.

Trump has repeatedly attacked Fed Chair Jerome Powell for not cutting rates and recently criticized a costly renovation of the central bank’s Washington headquarters. He also defended his decision to fire Fed Governor Lisa Cook over alleged mortgage fraud, sparking debate over the central bank’s independence.

Markets are pricing in a 90 per cent chance of a 25-basis-point Fed rate cut on Sept 17, according to the CME FedWatch tool. Gold, which yields no interest, tends to benefit in low-rate environments.

Analysts say gold’s 2025 rally—fueled by central bank buying, geopolitical uncertainty, and global moves away from the U.S. dollar—could extend further. “Gold’s rally could extend to US$3,600 and even beyond by year-end if the Fed follows through with multiple rate cuts and if a Russia-Ukraine peace deal remains elusive,” said Tim Waterer, chief market analyst at KCM Trade.

Spot silver traded flat at US$40.64 per ounce, near its highest since 2011. Platinum rose 1 per cent to US$1,412.95, while palladium slipped 0.7 per cent to US$1,129.52.