The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 08 July 2020, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points each, to 4.50 per cent and 5.50 per cent, respectively. The Board arrived at this decision with a view to inducing a further reduction in market lending rates, thereby encouraging the financial system to aggressively enhance lending to productive sectors of the economy, which would reinforce support to COVID-19 hit businesses as well as to the broader economy, given conditions of subdued inflation.

The Central Bank of Sri Lanka (CBSL) entered into agreements to begin the process of developing Blockchain Technology Based Shared Know-Your-Customer (KYC) proofs of concept (POCs) on 7 July 2020. CBSL identified the potential benefit for Sri Lanka’s financial services in 2018 and initiated an inter-industry study of Blockchain Technology, with the voluntary participation of the banks as well as the IT industry. CBSL decided to pave the way for Blockchain Technology based financial service solutions in Sri Lanka developing a Shared  KYC solution. The CBSL advertised inviting companies with experience in developing Blockchain Technology based solutions for Shared KYC to join this project on a voluntary basis. Upon receiving a number of applications, the CBSL selected three applicants to develop POCs concurrently.

The Central Bank, in consultation with the Government of Sri Lanka, has introduced the Saubagya Covid-19 Renaissance Loan Scheme to provide working capital loans at 4% interest rates to businesses adversely affected by the COVID-19 outbreak, through Licensed Banks, thereby supporting the revival of economic activity in the country. This Loan Scheme is available for COVID-19 affected businesses with an annual turnover below Rs. 1 billion, including self-employment and individuals. The Rs. 1 billion limit of annual turnover will not be applicable to businesses engaged in tourism, exports and related logistical supplies.

Headline inflation as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2013=100) declined to 3.9 per cent in June 2020 from 4.0 per cent in May 2020. This was solely driven by the statistical effect of the high base prevailed in June 2019. Food inflation (Y-o-Y) increased to 10.0 per cent in June 2020 from 9.9 per cent in May 2020. Meanwhile, Non-food inflation (Y-o-Y) declined to 1.4 per cent in June 2020 from 1.6 per cent in May 2020.

The change in the CCPI measured on an annual average basis remained unchanged at 4.7 per cent in June 2020.