• Currency down 2.2% amid widening trade deficit
• Increased import demand and relaxed restrictions cited as key pressures

Sri Lanka rupee among worst performers among emerging market currencies so far in 2025 as the currency is down by 2.2%, Bloomberg market data showed.

Accordingly, the data showed that among the 30 emerging market currencies, Sri Lanka rupee takes the 26th position with a spot return of negative 2.21%.

Among the emerging market currencies, 23 currencies have appreciated so far in the year with the Russian Ruble topping the chart having spot return of 37.5% and Hungarian Forint takes the second place with 11.36%.

The Sri Lankan rupee was among the seven currencies that have depreciated so far in the year, as Argentine Peso is the worst performer with negative return of 11.79% so far in the year.

Sri Lanka’s trade balance deficit increased to $ 1.14 billion in the first two months of the year, compared to $ 860 million in the corresponding period last year.

The Central Bank said that the merchandise trade deficit is projected to widen due to increased import demand in 2025, reflecting the relaxation of import restrictions alongside improved economic activity and higher spending capacity of businesses and households amidst easing monetary conditions, pressuring the currency.

It said that the immediate demand for the vehicle imports remained softer than expected.

“Overall, the current account is expected to record a surplus in 2025, contingent on the magnitude of the impact of relaxed vehicle import restrictions,” the Central Bank said, adding that the current account is likely to record sustainable deficits in the medium term.