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Monday April 22nd, 2024

Sri Lanka tourism could be facing worst crisis in history from Coronavirus: hotels chief

CLOSED DOORS: Tourist stand outside the closed Dehiwala Zoo, in Colombo on March 15, 2020, following the authorities announcement to close it for two weeks as a preventive measure against the spread of the COVID-19 coronavirus. LAKRUWAN WANNIARACHCHI / AFP

ECONOMYNEXT – With a global Coronavirus pandemic keeping people at home and flights cancelled from many countries Sri Lanka’s tourism industry is perhaps facing the worst crisis in history, an industry official said.

“This is the worst crisis we have ever seen in the tourism industry,” President of the Tourist Hotels Association of Sri Lanka Sanath Ukwatte told EconomyNext.

The current crisis is overshadowing hit the industry took from the 2019 April terrorist bombings, when arrivals fell 18 percent, he said.

Ukwatte said it is still too early to forecast the fall of tourist arrivals for 2020, as the situation is still developing.

“I personally think that the people will be comfortable and confident of traveling and going on vacation only after a vaccine is developed,” he said.

However health experts abroad had said that most new viral pandemics end when a large proportion of the population are infected and they get better, developing immunity across the population.

The so-called herd immunity comes into play when about 70 percent of the population gets the disease.

Sri Lanka’s tourism industry faced its biggest crisis in history in 1996 when arrivals plunged 25 percent to 303,265after Sri Lanka’s central bank was bombed during the civil war and tourist earnings dropped 23 percent to 173 million US dollars.

Sri Lanka’s formal tourist industry developed from around the early 1970s.

But in 1996, tourism accounted for just 1 percent of Sri Lanka’s gross domestic product (GDP), and disruptions did not cause as much of an impact for the economy as today.

By 2018, the industry had grown to contribute 5 percent to GDP with 4.4 billion US dollars in revenue.

Ukwatte said tourism earnings in 2020 are expected to fall even below the 2019 terror-hit numbers.

Central Bank provisional numbers showed Sri Lanka had earned 3.6 billion US dollars from tourism in 2019.

Up to Sunday 19 persons had tested positive for Coronavirus, including a Chinese national who recovered and left the country while over a 100 are under observation.

Sri Lanka in January restricted visa to Chinese nationals, who form a tenth of the island’s foreign visitors, as the virus outbreak accelerated, causing arrivals from the East Asian economy to plunge 92.5 percent, and total arrivals to fall 17.7 percent.

But in March 2020, boarding restrictions were placed on 11 countries including UK and Germany which are among the top generating markets for Sri Lanka.

Europe accounted for 44 percent of tourist arrivals to Sri Lanka in 2019. Within Europe, UK and Germany account for the largest shares, and the British government issued a travel advisory to its citizens on Sunday, saying Sri Lankan authorities would quarantine them to stop the spread of the virus.

In March, Sri Lanka restricted arrivals of holidaymakers who had been in South Korea, Italy, Iran, France, Germany, Spain, Switzerland, Denmark, Netherlands, Sweden and Austria since the start of the month. (Colombo/Mar16/2020)

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IMF official: Sri Lanka’s road ahead is challenging, critical to keep up with reform momentum

ECONOMYNEXT –International Monetary Fund’s First Deputy Managing Director Gita Gopinath said Sri Lanka’s future with many reforms are challenging, but it is critical to keep up with the reform momentum.

Gopinath stated this after meeting the island nation’s State Finance Minister Shehan Semasinghe Central Bank Governor Nandalal Weerasinghe, and Treasury Secretary Mahinda Siriwardena on the sideline of the IMF/World Bank Spring Meetings in Washington.

“I commended them on hard-won economic gains in the past year. The road ahead is challenging and it’s critical to keep up with the reform momentum,” Gopinath wrote on her X platform.

Under IMF programme, President Ranil Wickremesinghe has implemented a raft of hard reforms including higher taxes.

Sri Lanka agreed to the IMF programme after it declared bankruptcy with sovereign debt default in April 2022.

Semasinghe after the meeting tanks Gopinath for acknowledging Sri Lanka’s economic progress.

“Our discussion was insightful and productive, and we appreciate the opportunity to delve into the challenges and opportunities ahead,” the State Finance minister said in his X platform.

“We remain steadfast in our commitment to our reform agenda and eagerly anticipate continued collaboration with the IMF to advance our shared goals.”

Sri Lanka was compelled to go for IMF after the unprecedented economic crisis which was followed by a political crisis that ousted former president Gotabaya Rajapaksa and his government who were legitimately elected.

The IMF programme has included reforms in state-owned enterprises, fiscal sector and financial sectors to ensure debt sustainability.

The global lender also has pledged its support to speed up the island nation’s lingering debt restructuring process with private creditors including sovereign bond holders. (Colombo/April 22/2021)

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Sri Lanka motor racing crash claims 7 lives, 4 critical

ECONOMYNEXT – A deadly accident at motor Race Sri Lanka’s hill country town of Diyathalawa has claimed at least 7 lives police said, after a racing vehicle, in the seasonal Fox Hill Super Cross ploughed in to spectators after running off the track.

Another 21 spectators were injured Sunday, and hospitalized and at least four were critical, police said.

Thousands of people come to watch the Fox Hill Super Cross race, which is usually held in April, as large numbers of people head to the cooler climes in the hills.

According to footage taken by spectators one car overturned on the side of the track.

Sri Lanka’s Newsfirst television said Marshalls were waving flags to caution other vehicles, when another car went off the track and crashed into spectators. (Colombo/April21/2024)

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Widespread support for Sri Lanka debt workout, reform progress at IMF/WB meet: Minister

ECONOMYNEXT – There was widespread support for Sri Lanka’s debt restructuring and acknowledgement of progress made under an International Monetary Fund program, at meeting of the fund and World Bank, State Minister for Finance Shehan Semasinghe said.

“The strides made in our economic recovery and financial stability have been acknowledged as significant advancements towards our country’s prosperity by our stakeholders and international partners,” Minister Semasinghe said in an (twitter) post after attending the meetings.

“Further, it was heartening to note the widespread appreciation and support for Sri Lanka’s debt restructuring process.

“We remain steadfast in our commitment to reaching the restructuring targets and confident of smooth progress in the continued good-faith engagements for a speedy debt resolution that will ensure debt sustainability and comparability of debt treatment.”

Sri Lanka ended a first round of talks with sovereign bondholders in March without striking a deal but some agreement on the basis for a deal.

An initial deal with bilateral creditors have been reached, but they may be awaiting a deal with private creditors to sign formal agreements.

International partners have appreciated reforms made under President Ranil Wickremesinghe, Minister Semasinghe said.

“It was great to engage in productive bilateral discussions with all of whom appreciated the recent economic developments, progress in debt restructuring, strengthening of tax administration, and ongoing governance reforms,” he said.

Sri Lanka’s rupee has been allowed to re-appreciate by the central bank amid deflationary monetary policy, bringing tangible benefits to people in the form of lower energy and food prices, unlike in past IMF programs.

Electricity prices were cut as a strengthening currency helped reduce the cost of coal imports.

Related Sri Lanka central bank mainly responsible for electricity price cut

The currency appreciation has also allowed losses to the Employment Provident Fund imposed to be partially recouped, helping old workers near retirement, as well as raising disposable incomes of current wage earners on fixed salaries.

Related Sri Lanka EPF gets US$1.85bn in value back as central bank strengthens rupee

The IMF, which was set up after World War II to end devaluations seen in the 1930s after the Fed’s policy rate infected other key central banks, started to actively encourage depreciation after a change to its founding articles in 1978 (the Second Amendment).

The usefulness of money as a store of value, or a denominator of current and future values then decline, leading to loss of real savings, real wages and increases in social unrest.

Before that, members who devalued more than 10 percent after printing money for growth or any other reason, faced the threat of suspension from the organization as punishment.

Sri Lanka’s rupee has appreciated to around 300 to the US dollar now from 370 after a surrender rule was lifted in March 2023.

But there is no transparency on the basis that economic bureaucrats are allowing the currency to gain against the US dollar (the intervention currency of the central bank).

The rupee is currently under pressure, despite broadly prudent monetary policy, due to an ‘oversold position’ in the market after recent appreciation made importers and banks to run negative open positions as the usefulness of the currency as a denominator of future value declined with sudden strenghtening. (Colombo/Apr21/2024)

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