Budget 2024 allocates Rs. 2.3 billion to defuse tourism debt bomb
By: Staff Writer
Colombo (LNW): Sri Lanka’s 2024 Budget has been hailed as a game-changer, positioning tourism as a catalyst for economic development, Tourism Minister Harin Fernando emphasized.
With a focus on making Sri Lanka a premier global tourist destination, the Budget has allocated a substantial Rs. 2.3 billion to improve the tourism sector.
These allocations were not mere proposals but a well-thought-out execution plan to propel Sri Lanka into a top travel destination,” he added.
Minister Fernando stressed that the President’s vision to attract five million tourists by 2030 hinges on collaborative efforts at the provincial and local levels, urging the enhancement of new attractions and facilities.
However the critical tourism industry’s outstanding debt has risen to a staggering Rs. 700 billion due to high interest rates prompting analysts to describe it as ‘unsustainable’ and needs urgent response from the Government and the banking sector.
The massive indebtedness of the tourism industry came to light during the pre-Budget webinar on Saturday organised by the Daily FT and other stakeholders.
Former Price water house Coopers Managing Partner Sujeewa Mudalige revealed that in 2018, the tourism industry outstanding debt was Rs. 300 billion and it has doubled to Rs. 600 billion last year and estimate it have increased to Rs. 700 billion this year and could possibly balloon to Rs. 1 trillion in the next few years.
He said that the increase was despite the industry borrowing anew hence it was due to accumulation of capital and interest payable amidst the debt moratorium.
He categorically stated that tourism debt was unsustainable like that of the Government hence needs urgent action by all stakeholders.
He called for an appointment of a Task Force comprising Government, banks and tourism industry stakeholders to deal with the issue.
Mudalige noted the tourism sector will never be able to recover from the record interest rates of 2022/23.
He noted that the interest policy of the Central Bank has hurt several sectors. Sri Lanka’s Tourism Sector went through the Easter bombing in April 2019 followed by the COVID pandemic and the political and economic crisis.
Mudalige opined that even if Sri Lanka draws over 2 million tourists, the industry won’t be able to pay even the interest.
The sector cannot service loans at 30% and the penalties at 30%. The Banks have called upon the beneficiaries of the moratorium to commence the settlement of the full accumulated debt and the interest, within 60 months.
Former President of The Hotels Association of Sri Lanka (THASL) Anura Lokuhetty said: “We are not even in a position to earn sufficient Dollars to cover the monthly Bank commitments, given the period is only 60 months.
He called on President Ranil Wickremesinghe to offer via Budget 2024, a freeze in repayment till mid next year and banks to opt for a rescheduled repayment plan over a period of 10 years.
