Sri Lanka recorded a current account surplus in each of the first five months of 2025, driven by steady inflows from tourism, remittances, and services exports. Central Bank data showed the cumulative surplus stood at $1.3 billion, a 37.5% increase compared to the same period last year, suggesting continued progress in rebuilding external buffers after the 2022 crisis.
Yet, vulnerabilities persist. The merchandise trade deficit widened year-on-year to $472.5 million in May 2025 from $393.3 million in May 2024, as import growth outpaced that of exports. The trade deficit, however, narrowed from April levels, indicating some easing of import pressures. Vehicle imports rose sharply to $118 million in May, with the January–May total reaching $312 million, raising questions about demand-side pressures as economic activity resumes.
Terms of trade weakened in May, as rising import prices outstripped gains in export prices. Export earnings were concentrated in traditional markets led by the United States, India, and the United Kingdom, while China, India, and the United Arab Emirates remained the top sources of imports. These trade dynamics point to an external sector still vulnerable to price shocks and global demand fluctuations.
Services sector performance remained largely positive. Net inflows from services reached $226 million in May, down 6.4% year-on-year, but cumulative inflows rose 6.8% to $1.8 billion for the first five months. Tourism receipts were a key contributor, with May earnings estimated at $164 million and cumulative receipts at $1.5 billion, an encouraging sign for the industry, which has faced a slow post-crisis recovery.
Remittances remained strong. Worker remittances in May grew 17.9% year-on-year, bringing cumulative inflows to $3.1 billion. This trend continues to underpin external stability and household income, while also alleviating exchange rate pressure.
Portfolio flows showed signs of stabilisation. Foreign investment in government securities rebounded modestly in May following a net outflow in April. The Colombo Stock Exchange also recorded marginal net inflows, suggesting tentative investor confidence ahead of debt restructuring. Gross official reserves remained unchanged at $6.3 billion at end-May, inclusive of the swap facility with the People’s Bank of China. The Sri Lankan rupee depreciated by 2.5% against the US dollar by the end of June. While moderate, the currency’s movement reflects continued sensitivity to capital flows and commodity prices.