Sri Lankan government takes positive steps to subsidise tourism sector
In the wake of the events in Colombo on April 21, the Sri Lankan government has taken positive steps to subsidise the tourism sector. According to Sri Lankan media reports, the government is to work with banks to issue a debt moratorium and subsidise working capital for the tourism sector.
Eran Wikremeratne, the Sri Lankan Minister of State for Finance, was quoted as saying, “The arrangements will be made in discussion with the banks and the Central Bank was already working on issuing the relevant regulations.” The working capital debt and interest will be treated as separate loans to be repaid from July 2020. Working capital loans will be based on revenue of hotels.
According to Wikremeratne, the banking sectors involvement in the tourism sector – via loans to hotels, etc. – was about LKR280 billion; however, not all the loans will be rescheduled, as the moratorium will be on a case-by-case basis. Despite this, up to 75 per cent of the interests will be subsidised.
Big and small hotels, in addition to tour operators, will be entitled under the debt relief scheme; with some 500 small businesses, which had collectively received LKR15 billion in loans through Enterprise Sri Lanka, will also be eligible under the scheme.
Wikremeratne further added that the Value-Added Tax (VAT) on hotels will be cut from 15 per cent to 5 per cent; VAT from tourism establishments in 2018 was recorded at LKR18 billion. Tourism in Sri Lanka took a toll following the Easter Sunday bombings, with tourist arrivals falling 7.5 per cent from a year earlier to 166,975 in April.
Tourism arrivals are expected to fall by 60 per cent this May, according to the Sri Lanka Tourism Development Authority, with a 30 per cent drop expected for the year 2019. Sri Lanka is expected to lose US$1.5 billion in revenue from tourism this year.
EDITOR’S NOTE: Featured image courtesy of Chathura Indika