The main cause of vaginal dryness is not yet known. However, it seems that the damage of the blood vessels as a result of diabetes can be the reason for dryness in certain cases.
Diabetes can lead to several vaginal inflammation and infection and this can make sexual activities seem uncomfortable. Common examples are urinary tract infection (UTI) and yeast infection.
If you are suffering from any of the complications above, consult your doctor for possible treatment or medication. Controlling your blood sugar level can help to prevent these sex related complications in diabetes.