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The country’s foreign reserves reached US$ 6.1 billion at the end of 2025. This increase in reserves that includes a Chinese debt swap of US$ 1.5 billion is the country’s highest foreign reserve since the economic crisis of 2022. It was achieved in inspite of repayments of foreign debts during the year. This favourable outcome was achieved due to an increase in remittances from abroad, increased earnings from tourism and higher export earnings.

Important

It is vitally important to ensure that these favourable developments continue this year and that the trade deficit that has been widening owing to increased imports is contained. This is, however, no easy task in an uncertain international environment of global conflicts and trade wars.

Remittances

Remittances from abroad reached a record US$ 8.1 billion, surpassing those of any previous year. This increase in remittances is attributed to workers and diaspora members sending more money to assist families and friends affected by the cyclone, as well as to the country’s reconstruction, rehabilitation and rebuilding effort. Hopefully, this year’s remittances will be higher than that of last year.

Tourist earnings

Earnings from tourism also increased to US$3.2 billion. Although the number of tourists increased significantly, there wasn’t a commensurate increase in earnings from tourism, indicating the lower ex-penditure per tourist. This feature of low-spending tourists, some of whom are even running small enterprises, is a serious concern that has to be addressed.

Unaffected

Fortunately, the cyclone at the end of November did not deter tourists from visiting the country in December. Consequently, tourist earnings reached US$3.2 billion in 2025. One of the main contributory factors is the high number of tourists from India and China.

This year

The number of tourists expected this year is higher. This is, however, dependent on international conditions. The costs and risks of travel from western destinations would determine the flow of tourists from Europe and beyond. While this is so for travellers from the West, it does not affect our main sources of tourism—India and China. There is also an increase in visitors from Australia. Sri Lanka is a preferred destination for Australians.

Expectation

The tourist industry expects a further increase in tourists this year that would enhance our foreign earnings. It is important to ensure that we continue to be a safe destination for tourists. Furthermore, it is important to attract high-spending tourists.

Exports

The increase in exports to US$18 billion was indeed an important contribution to the country’s trade balance and external finances. Although the higher tariffs imposed by the US were expected to reduce merchandise exports, exporters appear to have rushed exports to the US. Furthermore, the European Union, Britain and Canada have opened up their markets to Sri Lankan merchandise exports. The expansion of exports to these and other markets in Asia is vital to increase exports.

Significant development

A significant development in external trade is the surge in exports of ICT (information and communications technology) services. Last year, the country earned as much as about US$5 billion from these services. It is vitally important that these services are expanded. The government must not disincentivise these service exports by taxes on these earnings. Instead, there should be an expansion of opportunities for training and assistance for obtaining job opportunities in ICT services abroad. There is reason to believe that Sri Lankans have a natural aptitude for developing skills in information technology. We should endeavour to make ICT services a leading foreign exchange earner.

Summary and conclusion

Our external finances improved significantly last year. In spite of debt repayments, our foreign reserves reached US$ 6.1 billion owing to higher remittances from abroad, record earnings from tourism and increased exports.

It is imperative that our foreign earnings continue to increase this year and that our imports are reduced to decrease our trade deficit. We must be mindful of the need to build up our reserves to enable us to meet our debt repayment obligations in 2028. However, the unpredictable international economic environment is not conducive for the country’s merchandise exports. The recent imposition of a 25 per cent import duty on our tea imports to the US because of our trade ties with Iran is illustrative of difficulties we may face.