New lifeline for battered tourism industry

• CB extends moratorium on capital and interest by 6 more months till Sept.; earlier freeze was to expire on 31 March
• Industry tells Tourism Minister unable to pay Rs. 105 b interest on Rs. 350 b loan outstanding
• Extension follows representations made to Central Bank
• Banks requested to convert capital and interest falling due during the moratorium period commencing from 1 April to 30 September into a term loan at 7% interest 
• Industry can submit request for extension by 19 April
• Banks urged to offer any additional support or options to borrowers

By Charumini de Silva 

Battered by the double whammy of the 2019 Easter Sunday terror attacks and the COVID-19 pandemic, the tourism industry has been given a fresh lifeline by the extension of the debt moratorium by six months. 

Following representations made by Tourism Minister Prasanna Ranatunga heeding pleas from the industry, the Central Bank late Friday announced the extension of the moratorium on capital and interest by six months from 1 April. The original moratorium was to end on 31 March. 

During a recent discussion with Minister Ranatunga, representatives from the various professions engaged in the tourism industry pointed out that tourist hotel owners have to pay interest of about Rs. 105 billion for the loans amounting to Rs. 350 billion and they are in great difficulty in paying back these loans and interests.

The Minister said that an agreement was reached during a special discussion with the Central Bank Governor Prof. W.D. Lakshman recently to extend the relief package provided to tourism industry stakeholders affected by the COVID-19 pandemic by six months.

On Friday, the Central Bank, via its Circular No.4, announced the extension of the debt moratorium for COVID-19-affected businesses and individuals in the tourism industry. A fortnight ago, the Central Bank also extended the moratorium on leasing facilities obtained by those engaged in the transportation of tourists.

After a 10-month closure, Sri Lanka re-opened borders and resumed international tourism on 21 January. Since then nearly 8,000 tourists have arrived whilst complying with health and safety guidelines on account of the COVID-19 pandemic.

Multi-stakeholder efforts are underway to increase tourists arrivals, though major markets of Sri Lanka, such as India, China, the UK and Germany are subject to outbound travel restrictions. The recent push has been to woo tourists from Russia, Eastern Europe and the Middle East. 

In its Circular, Central Bank said with a view to meeting the challenges faced by businesses and individuals engaged in the tourism sector due to the ongoing COVID-19 pandemic, licensed commercial banks and licensed specialised banks have been requested to extend the debt moratorium granted for the tourism sector under Circular No.8 of 2020 dated 26 August 2020 for another six months, commencing 1 April as specified below.

However, licensed banks may offer any additional options to borrowers, on the request of the borrower, in a way that the overall benefits to borrowers are not less than the benefits offered under this Circular. The aforementioned extension is granted in order to provide adequate time for borrowers to come up with proposals for a long-term arrangement. Therefore, borrowers shall submit acceptable plans to licensed banks for the restructuring of credit facilities over a long period of time, prior to the expiry of the extended moratorium period. Such plans shall be assessed on a case-by-case basis by licensed banks. Accordingly, this Circular is issued to give effect to the scheme in a consistent manner across all licensed banks.

The following provisions of Circular No.08 of 2020 have been amended and other provisions of the cited Circular will remain unchanged:

1. General Terms and Conditions

1. (iii) Debt moratorium refers to the moratorium for both capital and interest for a further period of six months commencing 1 April to 30 September.

1. (iv) Eligible borrowers who wish to avail of the moratorium shall make a request seeking such moratorium to the relevant licensed bank on or before 19 April. Licensed banks are requested to accept any request submitted after 19 April if the reasons for the delay in making such a request is acceptable. Any eligible borrower who has the capacity to service the loan repayment is expected to service such loan repayments instead of requesting this extension.

2. Structuring the debt moratorium

2. (i) Licensed banks shall convert the capital and interest falling due during the moratorium period commencing from 1 April to 30 September into a term loan. Licensed banks may amalgamate the capital and interest falling due during the previous moratorium granted with the capital and interest falling due during 1 April to 30 September, except for EM loans for which the interest rate for the moratorium period is capped at 7% per annum.

2. (ii) Licensed banks may commence recovery of such converted loans once the extended moratorium period is over.

2. (v) Licensed banks shall waive off the accrued and unpaid penal interest as of 1 April, if any, on credit facilities considered under this Circular. Penal interest shall not be accrued and charged during the moratorium period.