Sri Lankan economist Dr. Nishan de Mel has revealed three key reasons why tourism will not help resolve Sri Lanka’s debt deficit.
Speaking during an interview with the Sunday Times, the Director of Sri Lanka Think Tank, Verité Research pointed out that it is assumed that tourism-related issues are a short-term problem for Sri Lanka.
“There is this idea that it is a short-term problem that when tourists come back that Sri Lanka will do better. I think that is mistaken for three key reasons,” he said.
Dr. Nishan de Mel explained that firstly when tourism bounces back up it means tourism has improved and money flows out of the country just as money comes into the country.
“When travel improves, especially in a context like today when people are trying to hoard up on Dollars the tendency for money to flow out with people is also quite great,” he said.
The Sri Lankan economist further said secondly, tourism which was already present in 2017, 2018, and 2019 helped cover the trade deficit of Sri Lanka, but did not help cover the debt deficit.
“At that time, Sri Lanka still had to refinance debt that is paid through the debt that had been taken,” he explained.
Dr. Nishan de Mel said until Sri Lanka gets its ratings back up and obtains access to international markets tourism will not be capable of plugging that debt deficit hole.
He finally added that thirdly, Sri Lanka has overestimated what is actually earned through tourism.
“Sri Lanka estimates that it earns US$ 168 per person per night from every tourist that is in the country. This means a family of four is expected to spend US$ 675 a night in the country,” he said.
The Sri Lankan economist pointed out that however, only 11% of the tourists stay in five-star hotels, adding that even five-star hotel rooms do not cost so much.
“When you compare against what other countries estimate, what they earn from tourists, it is much lower than Sri Lanka. Thailand, European countries and Malaysia estimate lower numbers from the tourists,” he revealed.
Dr. Nishan de Mel said that Sri Lanka has done the estimates very poorly and has done it in a way that has exaggerated the belief that tourism brings in a lot of money.
He noted that it is unlikely that tourism brings in revenue, adding that even if revenue was generated through tourism it does not cover the debt deficit of the country.
The Sri Lankan economist said it does not plug the hole Sri Lanka has by being locked out of international financial markets. (NewsWire)