Headline inflation as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2013=100) increased to 4.2 per cent in July 2020 from 3.9 per cent in June 2020. This was mainly driven by monthly increase of prices of items in Non-food category along with the statistical effect of the low base prevailed in July 2019. Food inflation (Y-o-Y) increased to 10.9 per cent in July 2020 from 10.0 per cent in June 2020. Further, Non-food inflation  (Y-o-Y) also increased marginally to 1.5 per cent in July 2020 from 1.4 per cent in June 2020.

The Central Bank of Sri Lanka (CBSL) and the Reserve Bank of India (RBI) have entered into a currency swap agreement on 24th July 2020 under the Framework on Currency Swap Arrangement for South Asian Association for Regional Cooperation (SAARC) countries for 2019 - 2022. This would provide short-term financing to the CBSL to meet the country’s balance of payment requirements.

The intention of the CBSL in entering into this Swap agreement was to be able to maintain a sufficient short-term foreign exchange liquidity while preserving the foreign currency reserve position of the country intact. The challenging external economic environment of Sri Lanka today is the result largely of this Covid-19 pandemic. This Swap agreement has the approval of the Cabinet of Ministers, received on the recommendation of the Monetary Board of the Central Bank of Sri Lanka.