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Rs. 700 b tourism debt bomb ticking

The Sri Lankan tourism industry is facing a dire situation with an outstanding debt of Rs. 700 billion, described by analysts as 'unsustainable' and in need of urgent attention from the Government and the banking sector. During a pre-Budget webinar, Sujeewa Mudalige, former Managing Partner at Price water house Coopers, revealed that the debt has doubled from Rs. 300 billion in 2018 to Rs. 600 billion in the previous year, and is estimated to have reached Rs. 700 billion this year, potentially escalating to Rs. 1 trillion in the coming years. Despite industry borrowing, the debt accumulation, including interest, during the debt moratorium is cited as the cause. Mudalige emphasized the urgency of addressing this issue and proposed the establishment of a Task Force involving the Government, banks, and tourism industry stakeholders. He pointed out that the high-interest rates of 2022/23 have severely impacted the sector, making it incapable of servicing loans and penalties. Anura Lokuhetty, former President of The Hotels Association of Sri Lanka, urged President Ranil Wickremesinghe to freeze repayments until mid-next year via Budget 2024 and advocated for banks to implement a rescheduled repayment plan over 10 years. Despite the challenges faced by the tourism, construction, and apparel sectors, the Sri Lanka Banks Association President, Bingumal Thewarathanthri, cautioned against a standard across-the-board debt moratorium, recommending a case-by-case approach for supporting affected enterprises.

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