Tuesday, January 17, 2023
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BusinessCentral bank rejects hotels loan extension requests

Central bank rejects hotels loan extension requests

Its officials say hotels are in a position to repay their loans

Officials at the National Bank of Ethiopia (NBE) rejected the pleas of hospitality establishments to extend the loans borrowed from commercial banks in the aftermath of the coronavirus pandemic.

It is a decision taken a few weeks after Yinager Dessie (PhD), the governor of the central bank, announced the regulatory body’s firm position to reject the proposals made by businesses requesting an extension of their loans, citing conflict and the pandemic.

Hotels and other businesses involved in the hospitality sector have received 3.3 billion birr in the form of a stimulus package, with an interest rate of five percent, but struggled to repay their loans due to the pandemic, which has brought the sector to a standstill.

The interest rate was later adjusted to 5.5 percent, with 0.5 percent going to commercial banks, while the remaining is to be paid to the central bank, which has provided the money to the financial institutions.

Some banks, considering their business relations with the hospitality sector, extended the repayment period for the loan for some period of time. But that was not enough for industry players.

“We wanted to get the extension, since we are severely impacted by the instability in the Northern part of the country and the pandemic,” said Fith Woldesenbet (PhD), president of the Federation of Hotels and similar services employers, which requested a five-year extension period for the loans their members took.

Officials at the central bank are not convinced by the Federation’s justification.

“We have assessed the capacity of the hotels and concluded they have the capacity to repay their loans,” said Fikadu Digafe, vice governor and chief economist of the regulatory body.

Following the introduction of the diaspora-home coming initiative and the opening of the AU Summit, hotels are witnessing an increase in the number of guests. In the capital city, starred hotels are reporting an occupancy rate of above 40 percent, the highest since the pandemic came into the picture.

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