By Nisthar Cassim
The Government yesterday made public four specific measures, which effectively translate to billions of rupees in support, to boost the travel and tourism industry battered by the Easter Sunday extremist terror attacks.
State Minister of Finance
As requested by the industry, the Central Bank will direct banks not to seek capital and interest repayment of loans taken by all registered travel and tourism businesses for one year, i.e. till 31 March 2020. This is applicable for loans granted to the tourism sector as of 18 April 2019.
The Government estimates the banking sector exposure on travel and tourism sector to be around Rs. 280 billion, whilst analysts claimed it could be as high as Rs. 400 billion.
The one-year moratorium will be granted to loans taken under the Enterprise Sri Lanka program as well. State Minister of Finance Eran Wickramaratne revealed that around Rs. 15 billion had been lent under the Enterprise Sri Lanka loan schemes (Jaya Isura, Green Loan, etc.) for the tourism sector.
The borrowers’ repayment will start from 1 April 2020, and capital and interest payments falling due during the moratorium can be recovered from July 2020 onwards. Alternatively, the repayment period can be extended for the number of months it was falling due during the moratorium.
Travel and tourism loans registered on or before 18 April will be granted before 31 March 2020, under Enterprise Sri Lanka. The interest subsidy borne by the Government will continue to these loans from the date of grant.
The Finance Ministry and the Central Bank are also exploring options to extend relief for lease repayments of the travel and tourism sector.
As an additional support, the Government also announced interest-subsidised working capital for the travel and tourism sector. These working capital loans, based on annual turnover, will be provided under the Enterprise Sri Lanka program, with a two-year repayment period. For these funds, the Government will bear a 75% interest subsidy until 31 March 2020, and the applicable interest rate will be 3.4%.
For a travel or tourism business with a turnover of less than Rs. 100 million, the maximum working capital available under this scheme is Rs. 20 million. Other slabs include Rs. 50 million for those with turnover of Rs. 100-250 million, Rs. 150 million for those with Rs. 250-750 million turnover, and Rs. 250 million for turnovers above Rs. 750 million.
As exclusively reported by the Daily FT yesterday, VAT on the travel and tourism sector has been reduced to 5% from 15% until 31 March 2020. In 2018, VAT collection from the sector is estimated to be Rs. 18 billion.
State Minister Eran Wickramaratne emphasised that the Government is committed to a quick recovery of the important tourism sector, and the approach has been to make “rational decisions” and extend support on a “stage by stage basis.”
It was revealed that Finance Minister Mangala Samaraweera held fruitful discussions for financial support with the Asian Development Bank, when the latter attended its Annual Meeting in Fiji last week. “We are talking to other multilateral donor organisations for the same,” Wickramaratne added.
He noted that the horrific Easter Sunday attacks were a major setback, but such incidents have affected other developed and developing nations as well. “For Sri Lanka, which suffered a 30-year war, we have faced terrorism-related setbacks, yet the economy was resilient enough to grow. In the latest setback, the challenge is a quick recovery, especially in the tourism sector, which earned $ 4.4 billion last year with 2.3 million tourist arrivals,” he said.
He also commended the tourism industry’s collective initiatives to bounce back fast with the Government’s support and other measures to strengthen security.
The tourism sector’s fortunes impact the livelihood of two million people, and it employs 500,000 directly. The sector accounts for 6% of the economy.
Tourism Minister John Amaratunga thanked the Finance Ministry for being swift in granting much- needed support for the industry following the Easter Sunday attacks. “There will be more relief coming, depending on the pace of recovery, but we need to be rational and responsible,” he added.