In the midst of cascading events the novel coronavirus pandemic has unleashed, the hospitality and tourism sectors, one of the hardest hit sectors, has been granted a 3.3 billion birr short term financing bailout to aid in working capital shortages and salaries.
The National Bank of Ethiopia (NBE) has directed commercial banks to avail a six month loan, payable with a maximum of five percent interest rate and announced it will disburse some three billion birr.
Fitih Woldesenbet, President of the Ethiopian Hotels and Tour Operators Federation told The Reporter that NBE has responded to half their requests and that some 1,300 hotels and 500 tour operators have demanded for some 6.6 billion birr in bailout financing.
Responding to the requests, the 3.3 billion birr soft loan, according to NBE, is based on a six month impact analysis that banks should provide for their clients’ financial needs, explicitly to address salary and operational expenses.
The central bank has written to banks stating the 3.3 billion birr financing lasts between June 30 and October 31, 2020. A letter signed by Fekadu Digafe, vice governor and chief economist of NBE, states banks should first need to enter into agreement commonly refereed as “master loan agreement” and must submit guarantee documents.
A few weeks ago, leaders of the sector submitted bailout requests which included freezing debt repayment by at least one year, rescheduling debt repayment period and exemption of interests with tax waivers.
According to Fitih, the government has proactively responded to the appeals made by the sector, while two more essential requests are still pending. One of these questions was in regards to the freezing of existing credit provided for both hotels and tour operators. The request was to have at least a one year extension on repayments with cancellation of interests. The other request concerns the rescheduling of debt repayment periods.
For the past four years, the tourism sector has been struggling amid political tension, unrest and the like plaguing the country. However, in the face of a new administration, it regained momentum only to be halted in its tracks, by a global pandemic. Despite the cumulative setbacks, the tourism sector was able to fetch USD 3 to 3.6 billion, from close to 900,000 visitors, annually.
