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By Charumini de Silva
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Tourism Minister Prasanna Ranatunga
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The Government is working on securing concessionary multilateral funding for the tourism sector which is most impacted by the COVID-19 pandemic.
A fresh lifeline for the sector came up for discussion last Thursday with President Gotabaya Rajapaksa during the meeting to review the progress of the industry with Tourism Minister Prasanna Ranatunga.
It was revealed during the discussions that the debt moratorium of the tourism sector estimated at over Rs. 350 billion will lapse in August.
With the Central Bank informing the Tourism Ministry that the ongoing moratorium cannot be further extended beyond September, it was suggested to seek a fresh funding facility from either the World Bank and/or the Asian Development Bank (ADB) as fresh support. The interest component of these loans is estimated at over Rs. 100 billion.
Additionally, the sector has also received concessionary working capital (to manage their liquidity, solvency and maintain employment opportunities) as part of the Saubagya COVID-19 renaissance facility at 4% interest rate.
The grace period for these loans was extended till 30 September, given the continuous challenges faced by businesses and individuals engaged in the tourism sector due to the ongoing COVID-19 pandemic.
Banks were requested to convert capital and interest falling due during the moratorium period commencing from 1 April-30 September into a term loan at a 7% interest rate. Moratoriums on lease rentals of tourism-related vehicles were also provided and extended in tandem with the debt moratorium.
According to the 2020 Annual Report amidst the debt moratorium granted to tourism-related industries and other measures, including special concessional loan schemes to support the pandemic-affected businesses, credit to the Tourism sub-sector expanded by 11% or Rs. 26 billion to Rs. 261.7 billion from Rs. 235 billion in 2019.
The banking sector exposure to the tourism sector at the end of 2020 was stated at Rs. 331.2 billion or 3.6% of the total according to the 2020 Central Bank Annual Report. The Non-Performing Ratio of the sector was 6.8%.
During a recent discussion with Tourism Minister Ranatunga, tourism industry stakeholders highlighted their inability to honour upcoming debt repayment. Some suggested debt moratorium to be extended till December. The tourism industry was first offered a debt moratorium soon after the April 2019 Easter Sunday terror attack.
Official sources told the Daily FT that following the discussion last week, President Rajapaksa agreed in principle to the suggestions and the Tourism Ministry is now awaiting a favourable response from the Central Bank and the Treasury.
After a 10-month closure, Sri Lanka reopened borders and resumed international tourism on 21 January. Since then, around 10,000 tourists have arrived whilst complying with health and safety guidelines on account of the COVID-19 pandemic.
Earnings from tourism in 2020 plunged by 81% to $ 682 million from $ 3.6 billion in 2019. In 2018 earnings amounted to $ 4.4 billion. The total number of tourist arrivals in 2020 was down by 73% to 507,704, which comprised 507,311 tourists during the first three months of 2020, and a group of 393 tourists from Ukraine, who arrived under a pilot project based on the ‘bio-bubble’ concept in December 2020.
