📉 Sri Lanka External Sector Pressured: Current Account Deficit Widens in June 2026

• Overall Current Account & Trade Deficit - June 2026 recorded a monthly current account deficit of US$ 149 Mn, marking the third consecutive month in deficit. - Cumulative 1H 2026 current account deficit reached US$ 245 Mn, reversing from a surplus in 1H 2025. - The merchandise trade deficit expanded to US$ 5.5 Bn in 1H 2026 (up from US$ 3.3 Bn in 1H 2025). - Fuel imports expenditure surged 40.2% YoY in June amid Middle East tensions, while motor vehicle imports declined 27.1% MoM. • Sector Breakdown: Tourism & Remittances - The tourism sector was impacted by Middle East conflicts, with arrivals dropping 9.9% YoY and monthly earnings falling 10.8% YoY to US$ 151 Mn. - Workers' remittances provided a crucial buffer, growing 9.3% YoY to US$ 695 Mn in June and reaching US$ 4.6 Bn (+23.2% YoY) for 1H 2026. • Reserves & Exchange Rate - Gross Official Reserves stood at US$ 6.5 Bn at end-June 2026, including the PBOC swap and external debt service payments. - The Sri Lankan rupee depreciated 7.8% YTD against the US dollar by end-July 2026, though policy measures have recently reduced currency volatility.