Sri Lanka risks 30% fall in tourist arrivals; US $ 1.5bn in earnings

From left: Finance Minister Mangala Samaraweera in discussion with the Ministry’s Economic Advisor Deshal de Mel .
Pic by Sameera Wijesinghe

• Finance Minister admits tourism industry collapse is the biggest challenge
• Govt. expects to contain earnings losses between US$750 million - US$1 billion this year
• Tourism industry expected to recover within 1-2 years

By Nishel Fernando 

The Easter Sunday bombings could cost Sri Lanka’s tourism industry up to US$1.5 billion in foreign exchange losses with 30 percent fall in tourist arrivals this year, according to Finance Ministry estimates.

“Our biggest challenge is the collapse of tourism industry.  For every 10 percent reduction in tourist arrivals, we will lose US$500 million.  We could experience a decline up to 30 percent in tourist arrivals this year, with a tourism earnings loss of US$1.5 billion,” Finance Minister Mangala Samaraweera told reporters in Colombo yesterday.

The estimates are based on Central Bank and Ministry of Finance calculations. 

The Economic Advisor to the Ministry of Finance, Deshal de Mel said the government expects a loss between US$750 million to US$1 billion in tourism earnings this year with 15-20 percent fall in tourist arrivals all year around.

April, May and June are considered to be off peak months for tourist arrivals in Sri Lanka. Hence, de Mel noted that it allows the government to address the situation and position Sri Lanka to recover in time for the peak season towards the second half of the year.

If the country succeeds in doing so, he expects that the country could mitigate the tourist arrival slowdown to 15 percent with a US$750 million impact on tourism earnings during the year.
However, de Mel said that most likely there will be a 30 percent drop in tourist arrivals in the first three months in the aftermath of the attack, with approximately US$350 million reduction in tourism earnings. 

“If we ensure the safety factor, it will be a big positive indicator for the country’s tourism sector,” he stressed. 

Samaraweera emphasised that international support for the country’s law enforcing agencies and in particular to intelligent services would be crucial in combating terrorism. He noted that Sri Lanka is already receiving the assistances of the world’s best intelligences services.  

Meanwhile, he expects Sri Lanka’s tourism industry to recover within 1-2 years.

“From what we have seen in other countries which face similar international terror attacks, their tourism sectors have come back to normal within 1-2 years,” he said. 

The Minister pointed out that Tunisia’s tourism sector was able to recover within 2 years from the 2015 Sousse attacks which targeted tourists. He added that Tunisia’s tourist arrivals grew by 16.9 percent YoY at the end of September last year, surpassing the entire tourist arrivals recorded of 2014.

Speaking on how the government will support the tourism sector during their recovery process, he noted that it is planning to consult the industry to discuss further measures to support tourism during this challenging period. 

Samaraweera also recalled that the government has already made significant interventions to support the tourism industry in the budget by removing and reducing various taxes, including the removal of NBT, ESC and reduction of Cess on imported inputs.

The hotel industry employees are particularly expected to take a hit from the slowdown of the tourism sector as they will collect lesser amount from service charges while the hotel chains, the informal sector will also be affected.

Speaking to Mirror Business, the Secretary to the Ministry of Finance, Dr. R.H.S. Samaratunga stressed the private sector support is also needed to support the industry including its employees during the difficult period through collective actions. He noted that banks and financial institutions could reschedule loans for the affected businesses and its employees while offering reasonable rates for their loans. 

Sri Lanka tourism industry was targeting 3 million tourist arrivals with US$5 billion tourism earnings this year after reaching 2.3 million tourist arrivals with US$ 4.4 billion tourism earnings. 

MCC approves biggest ever grant funding for SL

The Millennium Challenge Corporation (MCC) of the US Government has approved a grant of US$ 480 million to Sri Lanka at its board meeting held on April 25th in Washington D.C. subject to Congressional Notification.

On the request of Prime Minister Ranil Wickremesinghe, the MCC has done an evaluation in terms of their investment criteria and selected Sri Lanka as a qualified country to receive grant funding under their Compact Investment Programme.

Under this grant, Sri Lanka is getting US$ 480 million for 03 main projects to be completed within a period of 5 years i.e. a special transport development programme covering the Colombo metropolitan area to reduce the traffic congestion by improving flow rate, reduce travel time, reduce traffic emission and reduce accidents combined with the Bus Transport Service Modernization programme including private and public sector transport service.

Under transport development, it will be improving the 131 KM road network on the Central Ring Road connecting Sabaragamuwa, Uva, Eastern, North Central and Wayamba Provinces to the Colombo markets and export hubs. Further, improvement of the land administration process also will be done in 08 districts, improving the land valuation system, upgrading 10 land registries and preparation of the Parcel Fabric Map of all State and private land to facilitate the activities of the Survey Department.