Sri Lanka’s external current account recorded a deficit of $ 142 million (m) in July 2026, marking the fourth consecutive month in negative territory as the nation navigates severe headwinds from geopolitical developments in the Middle East. According to the latest data, the cumulative external current account recorded a deficit of $ 387 m during the first seven months of 2026 (January-July).
During the January-July 2026 period, Sri Lanka’s cumulative trade deficit expanded to $ 6.5 billion (b), up from $ 3.9 b recorded during the same period in 2025. Export data shows that the primary cause is a widening merchandise trade deficit, which expanded due to elevated import expenditures, amidst weaker export performance.
Although monthly fuel import expenditures declined marginally from $ 465 m in June 2026 to $ 453 m in July 2026, fuel import costs increased significantly by 68.0% year-on-year in July 2026. The increase was primarily driven by higher expenditure on crude oil imports. Over the first seven months of the year, cumulative fuel import spending reached approximately $ 3,622 m, representing a 59.9% year-on-year increase compared to the same period in 2025.
In addition, motor vehicle import expenditures, encompassing both personal and commercial vehicles, stood at $ 241 m for the month of July. This brought the cumulative vehicle import bill for the January-July 2026 period to $ 1,495 m.
In July, the services sector, traditionally a key pillar of support, provided mixed signals. The services account recorded a surplus of $ 244 m in July 2026, reflecting a 23.0% decline compared to July of last year. However, on a month-on-month basis, the surplus surged by 50.7% from June, bolstered by a revival in tourism earnings. Reflecting an ongoing, year-on-year moderation in the services account, the cumulative surplus for the first seven months of the year fell by 22.4% to $ 1.8 b.
In terms of arrivals, tourist numbers dipped marginally by 1.7% year-on-year in July 2026. Cumulative tourist arrivals for January-July 2026 reached 1,343,418, trailing the 1,368,288 arrivals recorded during the same period in 2025. Tourism earnings followed a similar pattern, estimated at $ 286 m in July 2026, a 10.3% decrease year-on-year, but a remarkable 88.9% jump compared to June 2026. On a cumulative basis, tourism revenues for the year-to-date declined by 11.5% to $ 1.8 b.
Despite the trade pressures, strong workers’ remittances and robust official reserves have offered a vital safety net. Workers’ remittances grew by 11.5% year-on-year to $ 778 m in July 2026. This brought cumulative remittances during the first seven months of the year to $ 5.4 b, a substantial 21.4% increase on a year-on-year basis.
On the currency front, the Sri Lankan Rupee (LKR) depreciated by 5.5% against the US Dollar on a year-to-date basis by the end of August 2026. However, market pressures on the rupee have begun to ease, with the currency showing some appreciation in recent weeks. This stabilisation is attributed to the impact of recently implemented monetary, fiscal, and macroprudential policy measures designed to steer the economy through its external sector challenges.