Six-month debt relief for tourism, apparel and affected industries
The Central Bank of Sri Lanka (CBSL) has been called upon to impose a six months debt moratorium for tourism, apparel and industries affected by the coronavirus crisis immediately.
It has also been asked to provide working capital at four percent interest. Ministers have authorised the Cabinet Secretary to give a direction to the CBSL.
The move is part of initiatives taken by Prime Minister Mahinda Rajapaksa in his capacity as Minister of Finance.
These sectors, which employ one of the largest work forces in Sri Lanka, Premier Rajapaksa told his ministerial colleagues, suffered setbacks and they included tourism, exports, overseas employment, information technology ( IT), small businesses connected with these sectors.”
The Central Bank has also been requested to reduce Policy Rate below six percent and increase the market liquidity to bring down interest costs to the borrowers. The declining world oil prices have come as a great blessing to the government which has decided that local oil prices should not be reduced. Instead, it will set up a Fuel Price Stabilisation Fund which it believes would net in Rs 200 billion in the next six months.
The seriousness of the financial situation has been spelt out to the ministers by Premier Rajapaksa. He has pointed out that the Contingencies Fund had only Rs 150 million whereas the requirement of the Election Commission was about six billion rupees. In addition to the cash requirement of Rs 1.2 billion to settle bills in hand connected with the
November 2019 presidential election.
Since the Vote on Account was authorised by the President, Premier Rajapaksa has pointed out, the Treasury has taken measures to transfer Rs 8.8 billion to Contingencies Fund for the elections. A sum of Rs 500 million has also been released for anti Covid- 19 measures. Other commitments include Rs 10 billion to settle pharmaceutical bills and Rs 5 billion to construction contractors with priority being given to those in the small and medium sectors.
Among the other measures the government will embark on:
Impose an import duty on fuel to recover profit margins from petroleum imports.
Authorise the Treasury Secretary to transfer Rs 4 billion to meet food subsidies certified by the Chairman of Lanka
Sathosa/ CWE and Chairman of the Consumer Affairs Authority.
Authorise the Treasury Secretary to transfer Rs 50 billion from the Fuel Price Stabilisation Fund to settle the debt of the Ceylon Electricity Board. The CEB’s Chairman and Board of Directors to be told to use this to settle the CEB’s loans to the Ceylon Petroleum Corporation.
Encourage solar panel developers to implement an accelerated solar power unit for each household and the Government to subsidise the installation cost of such units in each house.
Premier Rajapaksa has noted that the National Budget and Appropriation Bill 2020 are prepared with fund flows expected to be improved most likely by the end of July this year.
A50 billion-rupee sixmonth refinancing facility was announced by the Central Bank (CB) on Friday, to support COVID-19affected businesses including individuals and those selfemployed.
The scheme will help tourism, direct and indirect export-related businesses including apparel, IT, tea, spices, plantation and related logistic suppliers, SMEs involved in manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorised domestic pharmaceutical suppliers, selfemployment businesses and individuals who have lost their jobs or income, and foreign currency earners (individuals and corporates).
The CB, in a public statement, said the re-financing facility is being initiated to implement the decisions taken by the Cabinet of Ministers on March 20 to introduce a wide range of fiscal and financial concessions for COVID-19 hit business activities including self-employment businesses and individuals.
Among these concessions are a debt moratorium (capital and interest) and a working capital loan at the interest rate of 4 percent for eligible customers.
The statement said that import facilities will not be permitted under this re-finance facility other than pharmaceutical drugs, medical equipment, food, fertilizer and essential raw materials and machinery and equipment.
“Financial institutions shall offer concessions under this scheme to all borrowers who have been affected by work disruption due to COVID – 19 and overseas lockdowns and requested relief through online facilities or other communication arrangements before 30.04.2020,” it said.
Under the scheme, a six-month debt moratorium will be provided on the leasing rentals of all three-wheelers, school vans, lorries, small goods transport vehicles and buses, and related assets such as motor bikes and taxies operated by the self-employed/owners; a debt moratorium until May 30 on personal loans granted to all private sector non-executive employees; a three-month debt moratorium for all personal loans and leasing rentals of value less than Rs. 1 million; and a six-month debt moratorium for affected industries in small and medium enterprises, tourism, apparel, plantation, IT and related logistic service providers.
It said pawning facilities falling due for settlement or maturing during the period up to 25.03.2020 shall be extended up to 30.09.2020.
Concessions were also offered for existing NonPerforming Loans (NPLs) where the penal interest charged up to March 25 shall be waived off by the concerned financial institutions.
In the case of the suspension of recovery actions, such recovery action will be suspended on condition that the concerned financial institution and the client reach a debt re-payment agreement.
Financial institutions shall defer passing new resolutions under the above Acts, for recovery of loans and advances in respect of borrowers participating in this scheme, the CB said.