With Sri Lanka introducing a visa-free entry program for tourists from India and six other countries, the bid evidently is in anticipation of boosting the tattered tourism sector which is a major dependability factor for the economy of the island nation.
This pilot project, in effect until March 31, 2024, will allow tourists from seven countries (China, India, Russia, Thailand, Indonesia, Malaysia and Japan) to visit Sri Lanka visa-free until 31 March 2024.
Visa-Free tourism to boost economy!
In the wake of a decline in tourism caused by the COVID-19 pandemic, various Asian tourist destinations are intensifying efforts to boost their tourism sectors. One of the strategies being employed by several countries is the provision of visa-free entry for tourists.
Sri Lanka, in particular, is taking significant steps to promote its tourism industry, which has been hindered by factors such as the Easter Sunday attack, the pandemic, and the ensuing economic challenges. To address these issues, the Cabinet has approved a joint proposal presented by the Prime Minister, Minister of Tourism and Lands, Minister of Foreign Affairs, and Minister of Public Security. The primary objective is to attract five million tourists annually to Sri Lanka within the next three years.
As for visa fees, the Sri Lankan Government currently charges approximately USD 127.08 per Russian or Chinese tourist. For a Japanese tourist visa and ETA processing the fee is JPY 4,233 (equivalent to Rs 9,254.88). A Malaysian tourist pays USD 20 per head, while visitors from Thailand pay USD 50. An Indonesian tourist, on the other hand, pays a fee of Rs 49,700 while for an Indian it is INR 2,200.
How Sri Lanka relies on tourism…
Sri Lanka heavily relies on tourism as a key driver of its economy. The visa-free entry for Indian and other tourists is aimed at attracting more visitors and boosting the tourism industry. The government hopes to increase tourist arrivals to five million over the coming years, which would provide a much-needed stimulus.
Sri Lanka has shown signs of recovery in its tourism sector, with a notable increase in the number of tourists during the first seven months of 2023. The island nation welcomed 763,000 tourists during this period, generating an income of approximately $800 million. This represents a significant growth of 205 percent compared to the previous year.
Prominent research and advisory firm around the island country are anticipating a surge in daily tourist arrivals during the upcoming winter season, boosted by the recently introduced visa-free policy for select countries. Analysts had identified these markets as vital for Sri Lanka to meet its arrival goals. However, with the recent policy change, they are now expecting a swiffer recovery in tourist arrivals from these nations in the short term.
As of October 22, 2023, Sri Lanka has welcomed 77,763 tourists, bringing the year-to-date tourist arrivals for 2023 to a total of 1,094,019. In September 2023, the tourism sector generated earnings of USD 152 million, contributing to a cumulative total of USD 1,457 million in tourism revenue for the first nine months of 2023.
Sri Lanka’s economic Challenges!
Sri Lanka, like many countries, has experienced significant economic challenges, particularly in recent times. The impact of the COVID-19 pandemic, coupled with a severe economic crisis, has tested the nation’s economic resilience. In this context, let’s revisit the state of the Sri Lankan economy, drawing insights from recent data.
One notable trend is the easing of Sri Lanka’s consumer price inflation rate. In September, the year-on-year inflation rate dropped to 0.8% from 2.1% in August, according to the statistics department. This decrease follows a period of high inflation, which was a result of the country’s worst financial crisis in decades. However, since June, inflation has seen a significant reduction. This can be attributed in part to the statistical base effect, as well as other factors like a stronger rupee currency and improved harvests.
While examining the price dynamics within the Sri Lankan economy, it is essential to distinguish between food and non-food items. Food prices fell by 5.2% in September, following a 5.4% decline in August year-on-year. In contrast, prices for non-food items increased by 5.9% in September after rising 9% in August. These price movements indicate a complex interplay between different sectors of the economy.
In an effort to stabilise the economy, Sri Lanka recently raised power prices for households by 18%. However, analysts anticipate that inflation will end the year at around 5%. While some increase is expected due to the conclusion of the base effect starting from September, the impact of price adjustments is not projected to be severe.
Sri Lanka recently secured a staff-level agreement on the first review of its $2.9-billion bailout package from the International Monetary Fund (IMF). However, it’s important to note that this agreement still requires approval from the IMF’s Executive Board. The country is also engaged in debt restructuring talks with major bilateral lenders, including Japan and India, as well as bondholders. Successful negotiations in this regard are crucial to advancing to the next stage of the IMF bailout, which includes a second tranche of approximately $330 million.
While Sri Lanka is making efforts to stabilise its economy, challenges persist. The nation’s economy is still expected to contract by 2% in 2023 after experiencing a significant 7.8% contraction in the previous year.
As the country navigates these economic challenges, the path to recovery remains a critical focus for policymakers and stakeholders and the current strategy of visa-free travel for certain countries in in fact an positive step forward.