The Central Bank of Sri Lanka (CBSL) released its External Sector Performance report for January 2026 on 27 February 2026, highlighting continued improvement in the country’s external accounts. The current account recorded a substantially larger surplus, the merchandise trade deficit narrowed, and workers’ remittances posted robust growth. These developments reflect a solid start to the year and build on the positive outcomes achieved throughout 2025.
This analysis presents the key figures and trends directly from the official CBSL report, offering a clear picture of Sri Lanka’s external sector dynamics in the first month of 2026.
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Merchandise Trade Deficit Narrows on Robust Export Growth
Merchandise exports rose 9.1% year-on-year to US$ 1,148.7 million in January 2026, compared with US$ 1,052.8 million in January 2025. This strong performance helped narrow the merchandise trade deficit to US$ 654.5 million, an improvement from the US$ 732.7 million deficit recorded in the same month of the previous year.
Merchandise imports increased only marginally by 1.0% to US$ 1,803.3 million. The slower growth in imports, coupled with healthy export expansion, eased pressure on the trade balance. For the full year 2025, exports totalled US$ 13,581.4 million (up 6.3% from 2024), while imports reached US$ 21,479.9 million (up 14.0%), resulting in an annual trade deficit of US$ 7,898.6 million.
The report notes that terms of trade deteriorated in January 2026 compared with January 2025, as import prices rose at a faster pace than export prices. Despite this, the overall trade outcome remained favourable on a year-on-year basis.
Current Account Surplus Widens Substantially
The current account posted a surplus of US$ 369.7 million in January 2026, marking a significant 270.6% increase from the US$ 99.8 million surplus in January 2025. This larger surplus follows the estimated full-year 2025 current account surplus of US$ 1,733.4 million, which itself was 43.8% higher than the 2024 figure of US$ 1,205.7 million.
The improvement in the current account was driven mainly by the secondary income account, supported by strong workers’ remittances. The services account recorded a net surplus of US$ 406.4 million, slightly lower than the US$ 418.3 million surplus in January 2025. The primary income account showed a reduced deficit of US$ 122.6 million compared with US$ 143.0 million a year earlier.
Workers’ Remittances Surge While Tourism Earnings Moderate
Workers’ remittances rose sharply by 31.1% to reach US$ 751.1 million in January 2026, up from US$ 573.0 million in January 2025. This strong inflow contributed to the secondary income account recording a net surplus of US$ 740.4 million, a 32.9% increase year-on-year.
For the full year 2025, remittances totalled US$ 8,076.2 million, reflecting a 22.8% growth over 2024 and underscoring their critical role in supporting the external sector.
Tourist earnings were estimated at US$ 378.3 million in January 2026, a 5.6% decline from US$ 400.7 million in January 2025. However, the CBSL report highlights that tourist arrivals increased year-on-year and surpassed the monthly level recorded in 2025. Services inflows overall grew 4.1% to US$ 734.4 million, while services outflows rose 14.1% to US$ 328.0 million, largely due to higher expenditure on overseas travel.
Gross Official Reserves Remain Stable
Gross official reserves, including the swap facility with the People’s Bank of China, stood at US$ 6.8 billion at the end of January 2026. The Central Bank remained a net purchaser of foreign exchange from the domestic market during the month, supporting exchange rate stability.
The change in reserves showed only a marginal decline of US$ 6.2 million in January 2026, compared with a decline of US$ 56.5 million in January 2025.
In the financial account, foreign investments presented mixed results. Net flows to the Colombo Stock Exchange recorded an outflow of US$ 21.9 million, while net flows to the government securities market showed an inflow of US$ 16.6 million.
Positive Outlook for External Sector Stability
The CBSL report states that the external current account recorded a larger surplus in January 2026 compared with recent months and January 2025. This follows the estimated surplus of US$ 1.7 billion in 2025 and indicates continued improvement in external sector performance.
The merchandise trade deficit narrowed on a year-on-year basis as export growth exceeded the growth in imports. The surplus in the services account decreased marginally due to higher services outflows, mainly from increased overseas travel. Nevertheless, the strong performance in workers’ remittances and export growth more than offset these movements.
As of the end of February 2026, the Sri Lanka rupee had appreciated 0.2% year-to-date against the US dollar.
January 2026’s external sector outcomes provide an encouraging foundation for the year ahead. Sustained growth in exports and remittances, combined with stable reserve levels, will be key to maintaining external sector resilience as Sri Lanka advances its economic recovery objectives.
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