Govt. announces relief package for struggling tourism industry
One-year moratorium period on loans obtained by SLTDA -registered tourism sector establishments and their employees
Fresh working capital loans with two-year repayment period for working capital requirements under Enterprise Sri Lanka
Reduction in VAT on hotels and tour operators to 5 percent from 15 percent up to March 31, 2020
Finance Ministry yesterday announced the much anticipated financial relief package to the country’s troubled tourism industry, which included a oneyear moratorium on loans, subsidized credit and 10 percent reduction in Value Added Tax (VAT).
Acting Finance Minister Eran Wickramaratne termed the financial relief package as “rational” pointing out that the government has addressed key demands of the tourism sector to continue with their business plans in the aftermath of Easter Sunday attacks.
The one-year moratorium will be valid
until March 31, 2020 and will apply to both capital and interest payments of loans granted to the tourism sector as of April 18, 2019.
However, only Sri Lanka Tourism Development Authority (SLTDA) registered tourist establishments and their employees will be entitled for this facility.
Once the moratorium period is over, the capital and interest payments falling in the period would be converted into a term loan and would be recovered from July next year at a concessionary rate.
Addressing a press conference yesterday at the Finance Ministry, Wickramaratne said the Central Bank is in the process of issuing a directive to banks in this regard and the moratorium will be considered by banks on a case-by-case basis.
However, the tourist industry has requested a two-year moratorium with an interest waiver for 6-12 months.
According to the Finance Ministry, the banking sector’s total exposure to the tourism sector is estimated at Rs.280 billion.
Wickramaratne also announced that the tourism sector can obtain fresh working capital under the ‘Enterprise Sri Lanka’ programme at a 3.4 percent concessionary interest rate with a repayment period of two years.
He noted that the government will provide 75 percent interest subsidy by allocating Rs. 1.5 billion.
The tourism sector firms with an annual turnover below Rs.100 million can apply for credit facilities up to Rs.20 million, while firms with a turnover above Rs.750 million can apply for loans up to Rs. 250 million under the scheme.
The Finance Ministry also expects the lending rates to come down by around 2 percent within the next 4-8 weeks with the Central Bank recently imposing deposit rate caps on financial institutions.
The government has also decided to reduce VAT on hotels and tour operators to 5 percent from 15 percent up to March 31, 2020, allowing the industry to offer discount prices on their products to tourists, in order to become more competitive.
According to the Finance Ministry, the government has collected Rs.18 billion as VAT from the hoteliers and tour operators last year, which is now expected to drastically come down.
Wickramaratne noted that the government will review the impact of the Easter Sunday bomb attacks on the economy and government revenue in June.
The tourism industry had also asked the government to reduce landing, passing and ground handling charges at Bandaranaike International Airport to support the airlines to offer discounted tour packages to tourists.
However, Wickramaratne noted that security is the key issue at the moment and the country needs to implement necessary measures stage-by-stage without being irrational.
“We have to go stage-by-stage; I don’t think we need to act irrationally on anything as it’s not the fundamental issue.”
Tourism Development, Wildlife and Christian Religious Affairs Minister John Amaratunga said the government is working with the industry to offer attractive travel packages to tourists.
“The hotels and airlines have come forward to offer heavily discounted rates for tourists,” he stressed.
Amaratunga revealed that the Cabinet of Ministers yesterday agreed to launch travel insurance schemes to tourists visiting the country in order to build confidence.
However, the details of the insurance cover are yet to be worked out. Some industry leaders have proposed that travel insurance should be up around US $150,000.
Amaratunga admitted that some of the relief measures, which were finalised at the Cabinet Sub Committee meeting on Monday haven’t been included in the relief package.
“We cannot give everything that people demand, we have to be rational. The most important relief that was demanded was given,” he said.
However, the minister noted that the loans granted by leasing firms to the tourism industry, in particular to tour operators, should also come under the same umbrella.
He said that he will make a fresh proposal to the government on this in the coming days.
In an attempt to enhance security at public places and other establishments where people gather, the government has allowed the public and private sector including religious establishments to import security scanners and metal detectors duty-free.