A top Central Bank of Sri Lanka (CBSL) official yesterday told Finance Today that the debt moratorium granted to any sector of the economy, especially the tourism sector in Sri Lanka, could not be extended further.
He pointed out that the current economic situation in the country could set the stage for further accumulation of non-performing loans particularly in the tourism sector in the future and if so, it could have a severe impact on the stability of the country’s overall banking and financial sector.
Accordingly, the CBSL has already recommended to the relevant Banks and financial sector companies to extend the concession, if possible, to suitable customers on a case-by-case basis.
“We, as the Central Bank, cannot directly intervene and persuade Banks and finance companies to extend this debt moratorium. Doing so could have a serious impact on the stability of the sector,” Instead, the spokesman said, the Banks and finance companies could provide further relief if they wished on an individual level, based on their liquidity positions and cash flow.
When Finance Today inquired about this from the heads of Bank of Ceylon and People’s Bank, they stated that they would make a proper assessment of the capabilities of the relevant customers and the liquidity level and the cash flows of the Bank and were ready to provide the relevant debt moratorium to their respective bankable customers.
They also will take into account the risk of increasing their non-performing loan portfolio if the relevant debt relief is not provided.
The debt moratorium period for the tourism sector is due to end today (30).
A request to extend the loan grace period until December 31 was recently approved by Cabinet, but the Central Bank had later refused to extend the grace period.
As more than three million people depend on the tourism industry in the country, the sector organisations on Tuesday called on the Government to extend the debt moratorium.
According to them, by the end of 2020, the tourism sector was expected to settle Rs 330 billion worth of loans and advances to the banking sector and another Rs 21 billion to the finance companies. Since then, with the new exchange rate adjustment and accrued interest rates, the total debt of the tourism sector is now around Rs 500 billion. This is about 5 per cent of the total finance sector lending.
Speaking at a media briefing on 28 June, tourism sector Heads said that the further postponement of the debt moratorium to the tourism sector would not have a significant impact on the banking sector.
The compelling case for the extension was made jointly by The Hotels Association of Sri Lanka (THASL), the Sri Lanka Association of Inbound Tour Operators (SLAITO) and the Association of Small and Medium Enterprises (ASMET).
SLAITO has also submitted a proposal to restructure existing tourism sector loans and advances with the assistance of the Asian Development Bank.
Tourism earnings are expected to be between US $ 800-1000 million this year.
The Government has provided a debt moratorium to the tourism sector for the past three years since the Easter Sunday attacks in 2019.
CBSL minor employees to resort to trade union action
A spokesman for the Central Bank Minor Employees Association said that the Central Bank Monetary Board had informed them that the debt moratorium given to minor employees of the Central Bank could not be extended further.
Minor employees say they will take some sort of trade union action in this regard in the future.
However, the Governor of the Central Bank, Dr. Nandalal Weerasinghe has stated that the Central Bank will not be able to provide additional relief to minor employees in a situation where relief of loans extended to other sectors of the country has been suspended.
By Ishara Gamage