Sri Lanka trade deficit widens to USD 6.5 billion on rising import costs

Sri Lanka recorded a significant widening of its merchandise trade deficit to USD 6.5 billion during the first seven months of 2026, driven by a surge in motor vehicle and fuel import costs.

Official economic data for the period ending July 2026 underscores how sharp increases in import expenditure alongside lower export revenues have strained the national trade balance.

Fuel imports remained a major contributor to the growing trade gap, with cumulative spending rising 59.9 percent year on year to reach USD 3.622 billion between January and July 2026.

Monthly fuel import costs stood at USD 453 million in July, representing a 68 percent jump compared to July 2025 due to higher crude oil purchases, despite a slight decline from the USD 465 million recorded in June.

Motor vehicle imports for both commercial and personal use reached USD 241 million in July, bringing the seven-month total for vehicle imports to USD 1.495 billion.

The widened trade deficit of USD 6.5 billion contrasts sharply with the USD 3.9 billion reported during the same period in 2025.

Despite these import pressures, gross official reserves reached USD 6.6 billion by the end of July 2026, supported by Central Bank foreign exchange purchases and an ongoing swap facility with the People's Bank of China.

Financial markets reflected this volatility as the Sri Lankan rupee depreciated 5.5 percent against the US dollar by late August 2026, though recent monetary, fiscal, and macroprudential measures have prompted a slight rebound in currency values.