Current account snaps deficits with $133 Mn surplus in August

Sri Lanka’s external sector demonstrated recovery in August 2026, as the external current account snapped a four-month losing streak to register a surplus of US$ 133 million. The monthly turnaround was primarily driven by reduced import expenditure, providing temporary relief to an external account hit by broader geopolitical volatility.

Despite the positive turn in August, the cumulative current account for the first eight months of the year remained in the red at US$ 291 million, heavily weighed down by spillover pressures from the ongoing escalation of the Middle East conflict.

While monthly import demand ebbed sufficiently to pull August into a current account surplus, the year-on-year merchandise trade deficit broadened during the month due to softer export revenues and higher overall import costs. For the period spanning January to August 2026, the cumulative trade deficit widened to US$ 7.2 billion, up from US$ 4.3 billion recorded during the same period in 2025.Sri Lanka’s terms of trade deteriorated both in August and on a cumulative basis through the year, as rising global import prices outpaced gains in export prices. Energy costs continued to dominate the import bill. Cumulative fuel expenditure surged by 61.6% year-on-year to approximately US$ 4.0 billion between January and August 2026. However, monthly fuel expenditure declined for the fourth consecutive month in August, hinting at potential stabilization in local consumption and prices.

Meanwhile, expenditure on motor vehicle imports—encompassing both personal and commercial vehicles—stood at US$ 189 million in August, marking a 24.2% drop compared to August 2025. Total vehicle import costs reached US$ 1,684 million for the January–August period. The services account surplus registered US$ 220 million in August, down 24.4% year-on-year, pulling the cumulative services surplus down by 21.4% to US$ 2.1 billion.

Tourist arrivals slipped 3.3% year-on-year in August (and 2.0% cumulatively for Jan–Aug). Despite the lower headcount, monthly tourism earnings ticked up slightly by 2.1% to US$ 264 million. Year-to-date tourism revenue slid 10.0% to US$ 2.1 billion compared to 2025. Inward workers’ remittances provided a significant cushion, climbing 10.0% year-on-year in August to US$ 749 million. Cumulative inflows for the first eight months surged 19.8% year-on-year to US$ 6.1 billion, highlighting sustained support from the overseas migrant workforce.

Reserve buffer strengthened amid currency slide. Capital markets reflected mixed foreign investor sentiment during August and svg government securities recorded a net inflow of US$ 70.2 million. The Colombo Stock Exchange (CSE) logged a net outflow of US$ 58.1 million across primary and secondary market transactions.

Supported by foreign exchange purchases by the Central Bank of Sri Lanka, Gross Official Reserves (GOR)—which include the swap facility with the People’s Bank of China—strengthened to US$ 6.9 billion by the end of August 2026.

On the exchange rate front, the Sri Lanka Rupee experienced ongoing pressure, depreciating by 6.3% against the US Dollar on a year-to-date basis by late September 2026. Courtesy Central Bank of Sri Lanka.