Sri Lanka’s external current account recorded a deficit of US$142 million in July, a fourth consecutive monthly shortfall, according to the Central Bank of Sri Lanka’s latest External Sector Performance report.
The cumulative deficit for January–July reached US$387 million, against a surplus in the same period of 2025, Ada Derana, the Daily FT and EconomyNext all reported. July’s figure follows a US$149 million deficit in June.
The trade gap has widened by two-thirds
The merchandise trade deficit reached US$6.5 billion over the seven months, against US$3.9 billion a year earlier — an increase of about 67%. The Central Bank attributed it to higher import spending alongside lower export earnings.
Merchandise imports rose 19.6% year-on-year to US$2.25 billion in July, taking the cumulative import bill up 26% to US$14.6 billion, the Daily FT reported.
Terms of trade deteriorated both in the month and across the seven months, as import prices rose faster than export prices.
Fuel is the single largest driver
Fuel imports cost US$453 million in July, marginally below June’s US$465 million — but 68% higher than July 2025, mainly on crude oil. Cumulative fuel spending reached about US$3.62 billion, up 59.9% year-on-year.
Vehicle imports remain the other significant pressure. Spending on personal and commercial vehicles was US$241 million in July, up from US$182 million in June, bringing the seven-month total to US$1.495 billion.
Services and tourism weakened; remittances held
The services account surplus was US$244 million in July, down 23% year-on-year but 50.7% above June on stronger tourism. The cumulative surplus fell 22.4% to US$1.8 billion.
Tourist arrivals slipped 1.7% year-on-year in July. Arrivals for January–July totalled 1,343,418, against 1,368,288 a year earlier. Tourism earnings were US$286 million in July — down 10.3% on the year but 88.9% above June — with cumulative earnings down 11.5% to US$1.8 billion.
Workers’ remittances were the clearest support, rising 11.5% year-on-year to US$778 million in July. Seven-month remittances rose 21.4% to US$5.4 billion, extending the strength recorded through the first half.
Reserves and the rupee
Foreign investment moved in both directions: government securities drew a net inflow of US$159.4 million in July, while the Colombo Stock Exchange saw a marginal net outflow of US$6.3 million.
Gross official reserves, including the swap facility with the People’s Bank of China, stood at US$6.6 billion at end-July, up from US$6.5 billion at end-June and supported by Central Bank foreign exchange purchases. That is consistent with the US$6.59 billion reported in early August.
By end-August the rupee had depreciated 5.5% against the US dollar year-to-date.
How this squares with the US$10 billion export figure
The two datasets published within 24 hours of each other measure different things, and differencing them would mislead.
The Export Development Board said on Monday that exports passed US$10 billion in the first seven months — but that US$10.49 billion figure is combined merchandise and services exports. The Central Bank’s US$6.5 billion trade deficit is calculated on merchandise alone, against a US$14.6 billion import bill, which implies cumulative merchandise exports of roughly US$8.1 billion. None of the three outlets published that cumulative goods figure directly.
Context
The Central Bank named “developments in the Middle East” as the backdrop, and the fuel numbers carry the mechanism: crude costs jumped after US strikes on Iran’s Larak Island and related disruption, and the first-half import bill was already running well above 2025.
The deterioration sits alongside other pressure points reported this week — total public debt at US$97.952 billion and Colombo inflation at 8% — though the Central Bank Governor said last week the economy had returned to pre-crisis levels on several measures.
What was not reported
None of the three outlets gave a full-year current account projection, said whether the Central Bank expects the deficit to persist through the remaining months, or set out how the reserve target is affected. No revised balance-of-payments forecast accompanied the release.
