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Freeze on tourism loans likely to be extended till Sept. 2021

23 November 2020 03:09 am - 0     - {{hitsCtrl.values.hits}}

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  • Tourism sector loan moratorium scheduled to lapse end-March, 2021
  • Extension to be supported through Treasury guarantees to banks 
  • Sri Lanka has closed borders for foreign tourists since March 

The temporary payment holiday on tourism sector loans granted in view of the loss of business due to coronavirus is likely to be extended till September 30, 2021 from an earlier timeline of March 31, 2021.


However, the additional six months of moratorium would be supported through Treasury guarantees to banks covering 50 percent of such loans. 


The loan moratorium on the tourism sector was earlier extended by six months effective from October 1 to March 31, 2021 and the banks were asked to charge not more than a percentage point above the one-year Treasury bill rate on a loan converted from the addition of capital and interest falling due during the relief period. 


Coronavirus gutted the travel and tourism sector as the highly infectious nature of the decease prompted countries to ban travel and close their borders since the beginning of this year. Sri Lanka closed its borders for foreign travellers in mid-March.


The travel and tourism industry seeks healthcare sector clearance to welcome foreigners again under strict guidelines as a prolonged closure of business could deliver a devastating blow to the industry.


“Debt moratoriums may reduce stress on businesses, but cause a bane for banks as the increase in number of restructuring/rescheduling facilities due to credit relief schemes increases credit risk,” said the analysts at First Capital Research, part of First Capital Holdings, a fully-fledged investment bank. 


However, economic analysts opine that the medium and the long-term view of affording financial relief to businesses has multiplier effects to the economy as it could retain jobs, maintain the upkeep of hotel properties until tourists return and help the banks to maintain their asset quality because potential bankruptcy of weak leisure sector players could boomerang on the banking sector itself. 


They say the leisure sector should be allowed to safely open up for visitors as countries now appear to be learning to deal with the virus while keeping their economies open. 


Maldives, a heavily tourism dependent economy reopened its borders in mid-July. 


Meanwhile, the interim financial reports of major listed resort operators showed that nearly a third of revenues during the July-September quarter were generated by domestic travellers after the resorts were opened 
in June. 

“The tourism industry can be developed in the short run, by tapping into the domestic tourism sector which has otherwise spent almost US$ 1,500 million per annum for foreign travel, to make use of the domestic tourist facilities by developing such facilities under strict health regulations,” the Budget 2021 which was presented in Parliament last week said. 

 

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