Within two weeks of the assurance given by President Maithripala Sirisena to the business leaders that the government would provide adequate assistance to revive the tourism industry from the blow received from the Easter Sunday terror attacks, a wide-ranging relief package was announced. The Cabinet of Ministers approved a one-year moratorium on capital and interest repayment for travel and tourism sector and offered many concessions including banking sector exposure to leisure sector estimated at Rs. 280 billion, two-year working capital loans based on turnover at 3.4% interest rate under Enterprise Sri Lanka programme with govt. subsidizing 75% of the cost and Value Added Tax (VAT) reduced to 5% from 15%.
The tourism industry would benefit from billions of rupees in support due to this relief package. A week after the Easter Sunday terror attack, President Sirisena called a meeting of tourism sector said that the government was responsible for working towards recovering and reviving the tourism industry and the hotel chains and other business sectors that were badly affected due to the recent terrorist attacks.
A Cabinet Sub-Committee was appointed at the very first Cabinet meeting after the terror attack to inquire on the future steps to be taken towards the development of the field of tourism and the relief package was formulated by thereafter.
Rebuilding tourism industry
On April 29, President Sirisena held a meeting with hotel owners, officials of the Tourist Board and Ministry of Finance to discuss the difficulties faced by the entrepreneurs engaged in the tourism sector due to this tragic incident and to find ways and means of rebuilding the tourism industry.
The agreements reached during the discussions regarding reliefs that should be given to the tourism industry, postponement of their loan repayment period, and to provide some sponsorship by the government to the institutions who are not able to pay wages for their employees.
â€œMoreover, on May 6, I summoned the representatives of the Chamber of Commerce and discussed regarding the reliefs that could be given by the Government for the entrepreneurs. I should clearly mention that the National Security Council meeting I didnâ€™t hold alone. I have invited the Prime Minister, the Cabinet as well as the MPs from Opposition,â€ President Sirisena said in Parliament on May 7.
In accordance with the Cabinet decision, the Central Bank of Sri Lanka 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 March 31, 2020. This is applicable for loans granted to the tourism sector as of April 18, 2019. The Government estimates the banking sector exposure on the travel and tourism sector to be around Rs. 280 billion, whilst analysts claimed it could be as high as Rs. 400 billion.
The tourism sector employs 500,000 directly and the number dependent on this industry is over two million. The sector accounts for 6% of the economy.
Announcing the relief package in Parliament, State Minister of Finance Eran Wickramaratne said that the one-year moratorium will be granted to loans taken under the Enterprise Sri Lanka programme as well. Approximately Rs. 15 billion had been lent under the Enterprise Sri Lanka loan schemes for the tourism sector. The Value Added Tax (VAT) on the travel and tourism sector has been reduced to 5% from 15% until March 31, 2020. In 2018, VAT collection from the sector is estimated to be Rs. 18 billion.
The banks will also allow the borrowers to extend the repayment period for the number of months it was falling due during the moratorium. Furthermore, the repayment will start from April 1, 2020, and capital and interest payments falling due during the moratorium can be recovered from July 2020 onwards. Under Enterprise Sri Lanka, travel and tourism loans registered on or before April 18 will be granted before the end of the current financial year. The interest subsidy of these loans will be borne by the Government.
The package also provides subsidies to travel or tourism business with different turnover levels in accordance with their capital investments. Those who are with 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 a turnover of Rs. 100-250 million, Rs. 150 million for those with Rs. 250-750 million in turnover, and Rs. 250 million for turnovers above Rs. 750 million. The Finance Ministry and the Central Bank are also exploring options to extend relief for lease repayments of the travel and tourism sector.
In addition to the above, an interest-subsidized working capital for the travel and tourism sector has also been announced. These working capital loans, based on annual turnover, will be provided under the Enterprise Sri Lanka programme, with a two-year repayment period. For these funds, the Government will bear a 75% interest subsidy until March 31, 2020, and the applicable interest rate will be 3.4%.
In the tourism sector, Sri Lanka earned $ 4.4 billion last year with 2.3 million tourist arrivals. The tourist arrival suffered a loss of 7.5% in April 2019, recording the first-ever decline in the last few years. The tourist arrival averaged almost 20% increase annually during the last decade.
The month recorded 166,975 tourists arriving in the country compared to the 180,429 arrived in April 2018.AAs at April 30, 2019, 907,575 of tourists had visited Sri Lanka for this year. It is a 2.2% growth over last year when 888,353 tourists had visited the country during the same period.
United Kingdom, India, Germany, China and Australia were Sri Lanka’s top five international tourist generating markets. In April United Kingdom was the largest source of tourist traffic to Sri Lanka with 15% of the total traffic received. India accounted for 14% of the total traffic while Germany, China and Australia accounted for 10%, 8% and 6% respectively.
At the meeting called by President Sirisena to discuss the issue, Chairman of Hotel Ownersâ€™ Association, Sanath Ukwatte expressed his gratitude to President Sirisena and the Government for the swift action taken following the Easter Sunday attacks. Business tycoon Harry Jayawardena thanked President Sirisena for the leadership displayed and the steps taken to restore normalcy in the country and expressed the fullest confidence that the country could recover quickly.