Currency swap
India’s central bank said on Tuesday it would allow its Sri Lankan counterpart to draw up to US$ 700 million over a maximum period of three months under a new special currency swap agreement signed by the two central banks.

The Reserve Bank of India has previously provided currency swaps to the Central Bank of Sri Lanka, including plans to extend a $1.5 billion agreement by one year.

Inflation forecast
The Central Bank of Sri Lanka last week said with the policy measures already adopted by the Central Bank, inflation is expected to remain in low- to mid-single digit levels during the remainder of the year.

Headline inflation (year-on-year) based on the Colombo Consumer Price Index (CCPI, 2006/07=100) increased to 2.7 per cent in February 2016, compared to 0.9 per cent in January 2016, mainly due to the dissipation of the base effect. Meanwhile, the increasing trend witnessed in CCPI based core inflation continued into February 2016 as well, with core inflation registering 5.7 per cent, on a year-on-year basis, in comparison to 4.6 per cent in the previous month.

Tourism & Remittances
Earnings from tourism are estimated to have increased by 19.4 per cent in February 2016, while workers’ remittances, which declined by 0.5 per cent during 2015, recorded an increase of 8.0 per cent during January – February 2016, the Central Bank of Sri Lanka said last week.

Reserves down
The Central Bank said that gross official reserves, which stood at US dollars 7.3 billion at end 2015, are estimated to have decreased to US dollars 6.6 billion by end February 2016. Accordingly, this was mainly due to debt service payments and the supply of foreign exchange to the domestic foreign exchange market largely to cover the demand arising from foreign investors who moved their funds away from the government securities market.