The National Bank of Ethiopia (NBE) approved a new financial stimulus package for the hospitality sector in response to the Coronavirus pandemic that has disrupted the tourism sector for almost a year.
The newly approved financial support, which will be provided in the form of loan, is an extension of the 3.3 billion Birr stimulus package which was applicable until November 10, 2020 and approved following the 6.6 billion Birr financial support request made by hotels.
According to sources, commercial banks can take as much as three billion Birr in fresh loans from the Central Bank to loan businesses engaged in the hotel and tourism sector.
An interest rate of 5.5 percent will be levied on the loan, marking a .5 percent increase from the previous rate of five percent.
The adjustment was made following the requests of commercial banks, which have been complaining that they were forced to incur service costs, as they were being forced to borrow the money availed by the Central Bank at five percent interest rate without additional fees.
“We were incurring additional costs without getting a penny. So the action of the Central Bank to let us charge one percent interest rate while taking the rest 4.5 percent is praiseworthy,” said a president of a Private Bank who spoke to The Reporter on condition of anonymity.
Although hospitality companies have not even borrowed the entire 3.3 billion Birr short term financing approved for the sector, hotels have been demanding for an additional financial package from the Central Bank.
“Understanding the enduring impacts of COVID-19 on the hotel and tourism sector, the National Bank of Ethiopia has decided to extend the expiry date for the financial package,” the bank said.
According to the Bank, borrowers are allowed to use the loan only to pay salaries and for working capital, while the package is due to expire on June 22, 2021.
In addition, the Central Bank has also directed commercial banks to further extend loans provided to hotels and other actors in the tourism sector, in order to reduce the impacts of the pandemic.
“NBE’s action is a step in the right direction and will help us temporarily alleviate the impacts of the virus on our business activities,” said Benyam Bisrat, Chairman of Addis Ababa Hotel Owners Association.
Although there had been hope that the hospitality sector would revive over the last four months following the discovery of a vaccine for COVID-19, no change has been observed so far, according to industry insiders.
“The tourism sector is still at a standstill. And leisure tourism is unthinkable, while the number of international tourists and business travelers coming to Ethiopia has reached a historic low. Given such circumstances, the financial package means a lot to industry players,” Benyam said.
