Central Bank yet to decide how long the extension should be
Hospitality establishments operating across the country requested for an extension to loans they took from commercial banks following the crisis brought by the coronavirus pandemic since the beginning of 2020.
Ethiopia Hotels and Related Service Provider Employers Federation wrote a letter to the National Bank of Ethiopia (NBE), demanding the regulator to instruct commercial banks extend loans provided to businesses involved in the hospitality sector, including hotels and tour companies.
This comes just eight months after the NBE rejected a similar request made by the Federation, which represents 1,400 hotels and service providers in the hospitality industry.
The Federation said the impacts of the pandemic is still being felt in the industry, adding that, hotels and similar service providers have faced a slowing business ever since the conflict broke out in northern part of Ethiopia, particularly in Tigray, Afar and Amhara regions.
Ever since the first case of COVID-19 was reported in March 2020, hotels have been facing a drastic fall in room occupancy rates, while the income of businesses involved in the industry dried up due to decline in the number of tourists.
The NBE responded to the crisis by availing two stimulus packages. It first made available 3.3 billion birr in soft loans during June 2020, a measure followed by another 2.7 billion birr in similar financial packages by the end of the same year.
The financial assistance, which was provided to cover payrolls and operational expenses, was availed with a maturity period of one year, with only a five percent interest rate. Later, the interest rate was adjusted to 5.5 percent, with the added amount made to cover the administrative expenses of commercial banks, which have been tasked to provide the loan after taking the money from the regulatory body.
“We cannot service the loan as per the deadline since our recovery is hampered by the conflict, which has further killed our business,” said Fith Woldesenbet (PhD), president of the Federation.
Industry insiders share the group’s observation.
“Our occupancy rate is below 20 percent, which is still not enough to cover payrolls,” said Dereje Bogale, manager of Golden Tulip, adding, his company is still facing a shortage of working capital because of slowing business.
Lately, some countries, including Egypt and Kenya, were able to show a slight recovery after the discovery of vaccinations for the COVID-19 pandemic, but little has changed in Ethiopia, particularly due to the war. Federal government officials are trying to offset this by introducing a new initiative to attract one million Diasporas to come back to the country. However, it is yet to bear fruit.
“The loan extension has to be implemented as soon as possible as we are yet to see changes brought by the home-coming diaspora initiative,” Dereje said.
Officials of the central bank are considering the proposal made by hospitality establishments.
“We are undertaking assessments to understand the current status of the hospitality sector and decide how long the extension should last,” said Fikadu Digafe, vice governor and chief economist of the central bank.
Contributed by Misganaw Fentaw