- Cabinet approves one-year moratorium on capital and interest repayment for travel and tourism sector
- Banking sector exposure to leisure sector estimated at Rs. 280 b; some estimate Rs. 400b
- Two-year working capital loans based on turnover at 3.4% interest rate under Enterprise Sri Lanka program; Govt. subsidising 75% of cost.
- VAT reduced to 5% from 15%; Rs. 18 b tourism sector VAT contribution in 2018
The Government made specific measures, which effectively translate to billions of rupees in support, to boost the travel and tourism industry battered by the Easter Sunday extremist terror attacks.
As an additional support, the Government also announced interest-subsidised working capital for the travel and tourism sector. These working capital loans, based on annual turnover, will be provided under the Enterprise Sri Lanka program, with a two-year repayment period. For these funds, the Government will bear a 75% interest subsidy until 31 March 2020, and the applicable interest rate will be 3.4%.
For a travel or tourism business with a turnover of less than Rs. 100 million, the maximum working capital available under this scheme is Rs. 20 million. Other slabs include Rs. 50 million for those with turnover of Rs. 100-250 million, Rs. 150 million for those with Rs. 250-750 million turnover, and Rs. 250 million for turnovers above Rs. 750 million.
As exclusively reported by the Daily FT yesterday, VAT on the travel and tourism sector has been reduced to 5% from 15% until 31 March 2020. In 2018, VAT collection from the sector is estimated to be Rs. 18 billion.
State Minister Eran Wickramaratne emphasised that the Government is committed to a quick recovery of the important tourism sector, and the approach has been to make “rational decisions” and extend support on a “stage by stage basis.”
It was revealed that Finance Minister Mangala Samaraweera held fruitful discussions for financial support with the Asian Development Bank, when the latter attended its Annual Meeting in Fiji last week. “We are talking to other multilateral donor organisations for the same,” Wickramaratne added.
He noted that the horrific Easter Sunday attacks were a major setback, but such incidents have affected other developed and developing nations as well. “For Sri Lanka, which suffered a 30-year war, we have faced terrorism-related setbacks, yet the economy was resilient enough to grow. In the latest setback, the challenge is a quick recovery, especially in the tourism sector, which earned $ 4.4 billion last year with 2.3 million tourist arrivals,” he said.
He also commended the tourism industry’s collective initiatives to bounce back fast with the Government’s support and other measures to strengthen security.
The tourism sector’s fortunes impact the livelihood of two million people, and it employs 500,000 directly. The sector accounts for 6% of the economy.
Tourism Minister John Amaratunga thanked the Finance Ministry for being swift in granting much- needed support for the industry following the Easter Sunday attacks. “There will be more relief coming, depending on the pace of recovery, but we need to be rational and responsible,” he added.