In Summary
  • In Kenya, new projections show that the economy will grow by 3.4 per cent, nearly half of what was reported last year.
  • China’s Wuhan city, which was the epicentre of the epidemic, has turned the corner through implementation of tough measures.

The country has entered a difficult moment in the war against coronavirus.

Consequently, drastic actions have to be taken. Starting Friday, there will be no night movements as a 7pm-5am curfew will be imposed, severely constricting activities such as business, work and social interactions.

Except for essential services like medical, national security, broadcasting and information, all others will be cancelled during the curfew hours.

This is the severest step taken so far as the number of Covid-19 infections hit 28, largely due to reckless and careless behaviour of citizens, as witnessed recently when health protocols were violated with abandon.

Public gatherings, among them burials, weddings, worship and open-air markets, as well as non-essential travel, have continued.

In the transport sector, social distance regulations have been flouted without a care.

In articulating the new measures, President Uhuru Kenyatta belaboured the fact that the greatest threat is ourselves — our inability, or refusal, to follow guidelines.

Notwithstanding the curfew, unless there is change in behaviour, the threat will persist.

STIMULUS PACKAGE

The dusk-to-dawn curfew instead of a lockdown, as has been imposed in several countries, including South Africa, will allow room for businesses and public engagement.

We all must respect and appreciate that window and act judiciously.

Significantly, the government announced a stimulus package to stabilise the economy and insulate it against the ravages of Covid-19.

President Kenyatta announced an 80 per cent pay cut for himself and his deputy William Ruto, 30 per cent for Cabinet secretaries and 20 per cent for principal secretaries.

Concomitantly, several tax reliefs have been proclaimed vide a 100 per cent waiver for low-income earners with a gross salary of Sh24,000 and below.

High-income earners got a five per cent relief. Value Added Tax goes down from 16 per cent to 14 per cent from April 1 and corporation tax from 30 per cent to 25 per cent.

SALARY CUTS

The salary cuts for top government officials will release additional cash to the National Treasury to boost its reserve to deal with the pestilence, while tax breaks will put more cash in the pockets of employees and cushion businesses from the devastation resulting from economic slowdown.

These are timely measures, which the business community, faced with drastically falling revenues and prospects for mass layoffs, had been asking for.

They add to the lowering by the Central Bank of Kenya of the threshold of cash that commercial banks should maintain by one percentage point, from 5.25 per cent to 4.25 per cent, which in practical terms releases Sh35 billion into the economy.

That gives banks flexibility on cash reserves, allowing them liberty to use the deposits more robustly.

In effect, they now have more money to lend, hence increasing the amount of cash for businesses.

Similarly, the Central Bank Rate (CBR) has been reduced by one percentage point, from 8.25 per cent to 7.25 per cent, which will reduce the cost of borrowing.

BANK LOANS

Businesses thrive in commercial borrowing and this works well when the interest rates are manageable. Commercial banks should reduce interest rates on lending.

Two things are crucial. First is adherence and second is prudence. Oftentimes, commercial banks circumvent such declarations by introducing several invisible charges that wipe out the intended gains.

Contrariwise, some borrowers mismanage bank loans and fail to make repayments, hence attract punitive actions.

As we have argued before, the novel coronavirus contagion is first a health challenge and second an economic and social threat.

International Monetary Fund chief executive Kristalina Georgieva captured the reality in a statement this week when she proclaimed that the impact of Covid-19 will be worse than the great global recession of 2007-9 that resulted from the vulnerabilities of the financial systems, including the US housing bubble.

The global Gross Domestic Product (GDP) fell to the negative.

FOLLOW REGULATIONS

In Kenya, new projections show that the economy will grow by 3.4 per cent, nearly half of what was reported last year.

But it could be worse, considering that agriculture, the mainstay of the economy, has been ravaged by locust, and matters are further complicated by unpredictable weather.

But at the core of all this is citizens’ responsibility to stop infections by following health regulations.

China’s Wuhan city, which was the epicentre of the epidemic, has turned the corner through implementation of tough measures.

Kenya has no option. Utmost sacrifice is paramount.