Sri Lanka’s external sector shows resilience in April 2025 despite widened trade deficit

Sri Lanka’s external sector remained strong in April 2025, supported by increased earnings from tourism and workers’ remittances, according to the latest report by the Central Bank of Sri Lanka (CBSL).

The “External Sector Performance” report, issued by CBSL’s Economic Research Department, highlights that the monthly current account continued in surplus for the fourth consecutive month since January 2025. This reflects ongoing resilience in the country’s external financial position.

Despite this positive trend, the merchandise trade deficit widened in April 2025 when compared to both April 2024 and March 2025. Imports grew significantly by 17.5 percent year-on-year, mainly due to a sharp rise in motor vehicle imports, which amounted to USD 134 million. In contrast, exports increased at a slower rate of 10.4 percent year-on-year.

However, CBSL noted an improvement in terms of trade during April. This was because import prices fell more than export prices, helping to cushion the impact of the growing trade gap.

Tourism earnings saw a notable rise, reaching USD 257 million in April 2025, up from USD 226 million in the same month last year. Similarly, workers’ remittances increased to USD 646 million in April 2025, compared to USD 544 million in April 2024, providing further support to the external sector.

In terms of foreign investment, the government securities market experienced a slight setback, with a marginal net outflow of USD 12 million in April, following a net inflow in March. On a more positive note, the Colombo Stock Exchange saw a recovery, with a marginal net inflow of USD 3 million, reversing the trend of outflows seen previously.

Gross official reserves remained strong at USD 6.3 billion by the end of April 2025, despite ongoing debt repayments. Meanwhile, the Sri Lankan rupee recorded a depreciation of 2.3 percent against the US dollar from the end of 2024 to the end of May 2025.

Overall, the report points to a resilient external sector with strong support from tourism, remittances, and steady reserves, despite challenges in the trade balance and minor investment outflows.