Appeals by hotel owners and tour operators for the extension of repayments of loans taken from commercial banks to assuage the severe impact of the COVID-19 pandemic has been rejected by the central bank. Authorities at the National Bank of Ethiopia (NBE) say they have no mandate to extend the repayment period and referred the case to the respective commercial banks.

The hospitality industry remains the hardest hit since the first case of the COVID-19 virus was reported in Ethiopia in March 2020. International visitors disappeared, nosediving hotel occupancy rate below 10pc, and tour operators dependent on international tourists dried up with revenues. Many reached the point where they could not have paid employee salaries.

The central bank responded to pressures from the industry, approving two separate stimulus packages to support the industries, which officially requested 6.6 billion Br in soft loans. Half of this amount was made available through commercial banks in June last year, with an interest rate of five percent. A subsequent 2.7 billion Br, with a lending rate of 5.5pc, followed at the end of last year. However, borrowers under this scheme were given six months to benefit from the package and required to use the loans to cover payrolls and operational expenses. These loans were scheduled to be repaid in a year.

The deadline for repayment is fast approaching, with borrowers now pleading with the central bank for extensions.

Despite welcoming the stimulus package, the Ethiopian Hotel & Service Employers Federation has requested the extension of the loan repayment, asserting that the fate of its members is uncertain, with the hospitality industry bracing for tougher months ahead amid growing concerns over the potentially devastating impacts of the second wave of the pandemic. An industry lobby group, the Federation represents 1,400 hotels and service providers in the hospitality industry.

The National Bank of Ethiopia (NBE) response will not be to the Federation`s liking.

The central bank made the financing available to commercial banks using quota arrangements, depending on the number of clients each has in the hospitality industry. In the first stimulus package, the banks were required to surrender the full amount collected from the five percent interest to the central bank, an amount brought down by one percentage point for the second lending. Authorities at the central bank see their role limited to availing the financing through the banks as a part of their effort to save the industry from collapse. The central bank cannot decide for the banks, which can extend the repayment period based on their own credit policies, according to Fekadu Degfe, vice governor of the central bank.

This will put hotels and others in a similar line of business caught between a rock and a hard place, according to Fiteh Woldesenbet, president of the Federation.

"There's no sign of recovery," he told Fortune. "Things are getting worse as our members keep losing revenues every day with no end in sight. It would be naive to expect the repayment period to end within a year under such conditions."

The industry wants to have at least three years to repay the loans, according to Fiteh.