Pan Asia Bank Chief Executive Officer is doubting the ability of the tourism sector to recommence servicing interest payments even next year, given its slow recovery and is expressing concerns over the ability of the bank to withstand such pressures any longer. 

“… it is difficult to say - given the slow tourism recovery - whether these customers will be able to meet the interest payments in the following year as well, which is of concern to medium-sized banks like Pan Asia Bank,” Pan Asia Bank CEO Nimal Tillekeratne stated in his annual review to the shareholders. 

In a bid to mitigate an all-out fallout from the Easter Sunday attacks, the Central Bank in May directed the banks to provide relief to the tourism sector by way of a moratorium of capital and interest payments, till March 31, 2020. 

However, the most recent credit support scheme to accelerate economic growth came into force in January this year enabled these same borrowers to apply for an interest moratorium up to December 31, 2020. 

Tourism arrivals and the sector were recovering up till January, this year, until the fresh threats from the novel coronavirus (COVID-19).

The United States Federal Reserve cut its benchmark rates by 50 basis points last week in an inter-meeting, the first such instance since the 2008 global financial crisis, to provide support to the US economy before the deadly virus hits spending. 

But the economic analysts doubt the appropriateness and the efficacy of monetary policy to fight a viral decease as much recovery depends on the response of the health and medical community and fiscal policy. 

Tillekeratne said the policy mix maintained until recently drew the SMEs into the brink of the cliff.  

“Needless to say, the weak economy, drop in demand, tight credit and new taxes and levies broke the back of the SME sector, in turn driving loan default rates through the roof,” he stated.