Sri Lanka is navigating a tightening financial squeeze as currency shortages shrink import capacity, limiting access to the most essential goods. Amid this squeeze, gains from certain export sectors, especially textiles, are contributing to a trade dynamic that has produced the island’s first trade surplus in two decades.
A recent assessment from the Central Bank highlights an improving balance of trade for the latest period, showing a surplus of 21 million dollars versus a deficit of 652 million dollars in the same window a year earlier. This marks a clear shift from months of deficits driven by debt pressures and import constraints in a tougher external environment.
Officials describe the surplus as the first positive trade balance since 2002, when a smaller surplus was recorded. The central bank cites a mix of stronger exports—up roughly 24 percent—and a roughly 26 percent drop in imports as the primary forces behind the change. Practically, energy and fuel costs, which weighed on the economy, appear to be easing, alongside a broader slowdown in nonessential purchases and discretionary imports.
Higher export earnings paired with disciplined import spending are lifting the macro picture. The central bank notes that while the surplus is welcome, it largely reflects a constrained import regime rather than a robust revival of domestic demand. The shift aligns with ongoing financial consolidation and a reconfiguration of trade flows in response to external shocks and domestic policy changes.
Sri Lanka remains in the grip of a severe economic crisis that has tested the country since its independence in 1948. High debt levels, past policy missteps, and the combined impact of the Easter events and the pandemic on tourism have underpinned core challenges. The crisis has drained foreign exchange reserves, leaving limited liquidity for securing essential resources such as energy and fuel. This constraint has forced tighter allocation of scarce resources and reduced investments in machinery, transportation equipment, and other nonessential goods as authorities prioritize basic needs and essential services.
On the export front, sectors like textiles and jewelry—diamonds and other precious metals—have shown resilience and continued activity, helping to cushion the economy amid broader headwinds. Sri Lanka resumed talks with international partners, including the International Monetary Fund, to secure a program that would support the availability of essential goods and fuel. The World Bank has signaled it does not plan new financing until a credible macroeconomic policy framework is firmly in place, underscoring the link between policy clarity, external financing, and steady access to critical imports. The evolving policy posture, alongside export-led improvements, remains a focal point for observers tracking the island’s recovery and its path toward sustainable growth. citation: Central Bank of Sri Lanka; IMF statements; World Bank assessments