Committee to decide tourism interest waive off

By Madhusha Thavapalakumar

A committee to discuss the possibility of waiving off interest on loans that were provided to the troubled tourism sector is to be appointed soon by Minister of Tourism Prasanna Ranatunga, following requests made by the sector.

Ranatunga told The Sunday Morning Business that the committee will be headed by Ministry of Tourism Additional Secretary of Development R.M.W.S. Samaradiwakara and will comprise a number of private sector officials.

The committee will mainly discuss ways to accommodate the request from the tourism industry with the Ministry of Finance, according to Ranatunga.

Minister of Tourism Prasanna Ranatunga

The local tourism sector made a request from the Government to waive off interest payments on loans for two years beginning April 2020 as the local tourism sector is expected to recover only by around April 2022.

The Hotels Association of Sri Lanka (THASL) President Sanath Ukwatte told The Sunday Morning Business two weeks ago that even if the Bandaranaike International Airport (BIA) was to be opened for international tourists in January next year, only about 100-300 tourists will be allowed a day, which is not going to bring in any meaningful revenue for the tourism sector and amidst such a scenario, paying interest rates on loans is not feasible for the sector.

He added that since the initial outbreak of the virus in Sri Lanka, the tourism sector is facing severe financial challenges and most of the hotels have already deteriorated their savings as they have been paying employee salaries from it.

“The restaurant business has declined by 80% this year. Hotel occupancy rates are almost zero. The entire sector is surviving under difficulties,” Ukwatte stated.

The BIA was initially scheduled to reopen on 1 August this year and this was moved to mid-August following a surge in local Covid-19 cases. The date was once again pushed back to September after several Covid-19 clusters were identified within the country. About two weeks ago, the Government was contemplating whether to reopen the airport by January next year. However, another committee was appointed on 7 December to review the airport opening protocol, the appointment of which is expected to delay the reopening further.

Following the lifting of the lockdown in May, hotels and tourist establishments were getting business from local travellers. Even though the revenue from local travellers is far lower than that of international tourists, local tourism was a welcome relief for the owners of these hotels to keep their businesses up and running with a glimmer of hope. Hotel occupancy rates picked up gradually to about 20% in August and September mainly due to local tourists.

Shattering these hopes, on 4 October, Sri Lanka detected the first patient of what would later grow into its largest Covid-19 cluster that keeps expanding even up to date, and the resultant quarantine curfews have been another body blow to the domestic tourism industry.

Days before the detection of the second wave of Covid-19 in Sri Lanka, the Central Bank of Sri Lanka (CBSL) extended the moratoriums which were provided to the tourism sector of the country initially for a period of one year, following the Easter Sunday tragedy.

The CBSL requested banks to provide a debt moratorium to Covid-19-affected businesses and individuals in the tourism sector for a further period of six months commencing from 1 October 2020, to 31 March 2021. The CBSL directed the banks to amalgamate the capital and interest fall due during 1 April 2020 to 30 September 2020 with the capital and interest fall due during 1 October 2020 to 31 March 2021, except for Equal Monthly Instalment (EMI) loans for which the interest rate for the moratorium period is capped at 7% per annum.

The Budget 2021 proposed to extend the concessions and recovery of loans granted under the re-financing facilities of the CBSL until 30 September 2021 and to provide the banks with a Treasury guarantee covering 50% of such loans.

Sri Lanka’s tourism sector is among the top three foreign exchange-earning sources of the country. Even before the closure of the airport to mitigate the spread of the virus, Sri Lanka was struggling to attract tourists in the early weeks of this year, mainly due to stringent travel restrictions imposed in China, which is among the top five tourism-generating markets of Sri Lanka.

Tourism arrivals had been gradually recovering after the Easter attacks last year and the reported arrivals into the country stood at 1.9 million in 2019, compared to 2.3 million in 2018. This year, January arrivals were 228,434, a year-on-year drop of 6.5%, while February arrivals were 207,507, a year-on-year drop of 17.7%. March arrivals dropped to 71,370 compared to the 244,328 arrivals during the same period last year.