The external sector continued to reflect the impact of developments in the Middle East, with the monthly current account recording a deficit in June 2026.
The external current account recorded a deficit of US$ 149 million in June 2026, marking the third consecutive monthly deficit. The cumulative deficit for the first half of 2026 was US$ 245 million compared to the surplus recorded in the corresponding period of 2025.
The merchandise trade deficit widened on a year-on-year basis in June 2026, as the increase in import expenditure outpaced the growth in export earnings. Consequently, the cumulative trade deficit widened to US$ 5.5 billion during the first half of 2026, compared to US$ 3.3 billion in the corresponding period of 2025.
Although the expenditure on fuel imports increased by 40.2% (year-on-year) in June 2026, mainly reflecting higher expenditure on refined petroleum products, it continued to moderate from US$ 886 million in April 2026 to US$ 536 million in May and further to US$ 465 million in June 2026. Cumulative fuel import expenditure amounted to approximately US$ 3,168 million, during the first half of 2026, recording an increase of 58.8% (year-on-year) compared to the corresponding period of 2025.
The expenditure on motor vehicle imports, including both personal and commercial vehicles, declined by 27.1% (month-on-month) to US$ 182 million in June 2026. Meanwhile, cumulative expenditure on motor vehicle imports amounted to US$ 1,254 million during the first half of 2026, recording a decline from US$ 1,572 million recorded during the second half of 2025.
The terms of trade deteriorated on a year-on-year basis in June 2026, as import prices increased at a faster pace than export prices. Similarly, the terms of trade during the first half of 2026 deteriorated compared to the corresponding period of 2025.
The services account surplus moderated to US$ 162 million in June 2026, declining by 33.8% from a year earlier, primarily due to services outflows growing more rapidly than services inflows. This led to the cumulative services account surplus during the first half of 2026 to be 22.4% lower than the surplus in the corresponding period of 2025.
Tourist arrivals declined by 9.9%, year-on-year, in June 2026, as the tourism sector continued to be affected by the conflict in the Middle East. Total arrivals during the first half of 2026 declined marginally to 1,146,573 compared to 1,168,044 arrivals in the first half of 2025. Tourism earnings were estimated at US$ 151 million in June 2026, reflecting a contraction of 10.8% from a year earlier. Further, cumulative tourism earnings during the first half of 2026 declined by 11.8% to US$ 1,511 million compared to the corresponding period of 2025.
Workers’ remittances, amounted to US$ 695 million in June 2026, recording a 9.3% year-on-year increase. Cumulative remittance inflows during the first half of 2026 increased by 23.2% (year-on-year) to US$ 4.6 billion.
Foreign investment in the government securities market recorded a net inflow of US$ 30.2 million, while foreign investment in the Colombo Stock Exchange (CSE), including both primary and secondary market transactions, recorded a marginal net outflow of US$ 0.4 million during the month of June 2026.
Gross official reserves (GOR), including the swap facility with the People’s Bank of China (PBOC), were recorded at US$ 6.5 billion by end June 2026 amid sizeable external debt service payments.
By end July 2026, the Sri Lanka rupee depreciated by 7.8% against the US dollar on a year-to-date basis, reflecting external sector pressures arising from the conflict in the Middle East. However, the pace of depreciation has moderated recently, with the rupee becoming less volatile following the recently implemented monetary, fiscal and macroprudential policy measures.
