The government has introduced several initiatives to provide relief to the struggling tourism sector.
State Minister of Finance Eran Wickramaratne said that the Central Bank will direct banks to provide a one-year debt moratorium and subsidised working capital for the tourism sector in order to support the sector that has suffered a massive hit in the aftermath of the attacks.
The moratorium period will be until 31 March 2020 for both capital and interest payments granted as of 18 April 2019.
The working capital loans will be based on the revenue of hotels and working capital debt. Interest will come under separate loans to be repaid from July 2020. The state minister added that up to 75% of the interest will be absorbed by the government from the effective interest rate until 31 March 2020. However, the moratorium will be provided on a case-by-case basis. Large hotels, smaller operations and tour operators are entitled to the debt relief scheme.
The concessions are also extended to over 500 small business owners who have collectively received a total of Rs15 billion through the Enterprise Sri Lanka initiative implemented by the Finance Ministry. Interest subsidies on tourism loans registered on or before 18 April 2019, and granted before 31 March 2020 under the loan scheme, will be borne by the government.
To provide further relief to the tourism sector, the government has decided to reduce the value-added tax on hotels and tour operators registered with SLTDA by 1 April 2019. The VAT reduction will be in place until 21 May 2020.
Bringing the informal sector into the fold
The Finance Ministry also has plans to provide a financial relief programme for the informal sector, especially small hotels and homestays which have been severely affected by the drop in tourists. To be eligible, unregistered businesses must apply for a three month provisional registration with the SLTDA, obtain a recommendation letter, and apply for financial assistance.
Informal accommodation providers can apply for an interest free loan of up to 500,000 rupees under the ‘Sancharaka Podda’ loan scheme which will be given under the Enterprise Sri Lanka credit. The loans will be provided by the Regional Development Bank. The Treasury will give the interest subsidy of around Rs 1,500 million.
The loan will have to be repaid in three years and borrowers are given a grace period of one year.