The impact of the war in the Middle East was reflected in the performance of the External Sector in April 2026 as well. The external current account recorded a deficit in April 2026 compared to the surplus recorded during January through March 2026. This was mainly driven by the widened trade deficit, a moderation in the services surplus, and higher primary income account deficit, despite an increase in workers’ remittances compared to a year earlier. Consequently, the external current account recorded a marginal deficit during January to April 2026.
The merchandise trade deficit widened in April 2026, reflecting stronger growth in imports relative to exports. Further, during January–April 2026, the trade deficit widened to US$ 3.7 billion, compared to US$ 2.3 billion in the corresponding period of 2025.
Expenditure on fuel imports increased notably by 149.9% on a year-on-year basis to US$ 886 million in April 2026, driven by the surge in fuel prices in the global markets amid the ongoing conflict in the Middle East and higher import volumes.
Expenditure on motor vehicle imports, including both personal and commercial vehicles, amounted to US$ 208 million in April 2026, bringing total expenditure on motor vehicle imports to US$ 821 million during January-April 2026.
The terms of trade deteriorated on a year-on-year basis in April 2026, as the increase in import prices exceeded the increase in export prices. Meanwhile, the terms of trade also deteriorated during January–April 2026 compared to the corresponding period of the previous year.
The surplus in the services account declined by 37.8%, year-on-year, to US$ 229 million in April 2026, primarily due to the reduction in tourist earnings. The cumulative surplus also contracted by 24.3% during January to April 2026 compared to the corresponding period of 2025.
Tourist arrivals declined for the second consecutive month in April 2026 to 135,643, recording a year-on-year contraction of 22.3%, owing to the impact of Middle East conflict. Tourist earnings were estimated at US$ 157 million in April 2026, reflecting a year-on-year decline of 38.8%, and the cumulative earnings during first four months of 2026 declined by 19.4% amounting to US$ 1,111 million compared to the corresponding period of the previous year.
Workers’ remittances, amounting to US$ 768 million in April 2026, continued to sustain the positive momentum observed in recent months. On a cumulative basis, workers’ remittances during the first four months of the year recorded a year-on-year growth of 24.5% to US$ 3,063 million.
Foreign investments in the government securities market recorded a marginal net inflow of US$ 2 million, while foreign investments in the Colombo Stock Exchange (CSE), including both primary and secondary market transactions, recorded a net outflow of US$ 16 million during the month of April 2026.
Gross official reserves (GOR), including the swap facility with the People’s Bank of China (PBOC), stood around US$ 6.8 billion by end April 2026, amidst sizeable external debt service payments and net foreign exchange sales by the Central Bank.
As of end May 2026, the Sri Lanka rupee had depreciated by 5.4% against the US dollar on a year-to-date basis, reflecting heightened external sector pressures following the effects of the escalation of the Middle East conflict since late February 2026. This depreciation is in line with the currency depreciation trend that was observed in peer economies.
Meanwhile, the International Monetary Fund (IMF) Executive Board completed the combined Fifth and Sixth Reviews of the Extended Fund Facility for Sri Lanka on 27 May 2026, providing Sri Lanka with immediate access to SDR 508 million (about US$ 695 million) to support economic policies and reforms.
