Gov’t urged to reinstate COVID-19 relief measures to aid economy

Members of the Institute of Certified Investments and Financial Analysts (ICIFA) have called on the government to reinstate relief measures to cover Kenyans against evolving effects of the COVID-19 pandemic.

In a joint statement on the state of public debt and the evolution of the pandemic, the analysts argue cushioning to both businesses and households remains crucial in managing the effects of the crisis.

“It remains necessary to help the liquidity and digital capability of companies to shield healthy firms from irreversible closing. In addition, assistance is required for the “new poor” who have lost livelihoods following the work and tax losses precipitated by the crisis. This may be done by a horizontal, sufficiently tailored, timely, and temporary scale-up of social security services as the crisis continues,” read part of the statement.

“Continued funding for disadvantaged families is crucial, thus safeguarding intellectual resources by increased access to new technologies, together with enhanced access to knowledge to reduce the usage of harmful coping mechanisms such as wealth liquidation and to tackle food insecurity while compensating for the rise in poverty.”

At the start of the pandemic, the government deployed both its fiscal and monetary capabilities to manage the economic impact occasioned by COVID-19 related disruptions.

For instance, the Central Bank of Kenya (CBK) cut its benchmark lending rate to seven per cent while further lowering the cash reserve ratio (CRR) to 4.25 per cent to support liquidity in the economy.

Further, the reserve bank gave a six months moratorium on the listing of Kenyans with Credit Reference Bureaus (CRBs) to September 2020 while allowing banks to restructure loan repayments to customers.

On its part, the National Treasury effected lower tax rates including pay as you earn (PAYE), corporation tax and value added tax (VAT).

Moreover, the exchequer announced a Ksh.56.6 billion economic stimulus package (ESP) which included cash transfers to vulnerable households.

The combination of fiscal and monetary measures have nevertheless neared exhaustion with Treasury for instance reversing its bulk of cushioning measures at the start of 2021.

Last week, CBK Governor Dr Patrick Njoroge warned of a much tougher and riskier economic forecast for the year with the economy having been stripped off part of its shock absorbents.

“We have now entered 2021 with minimum buffers by private sector actors, households and even government having eroded part of the shielding in 2020,” the CBK Governor said on Thursday.

“This makes building back tougher and riskier as we have to be more efficient in the use of resources. We also need to strengthen weak points to bring about a soft landing for the economy.”

In spite of expectations of a tougher rebuild, the National Treasury has retained a bold projection on GDP as it expects the economy to grow by 6.4 per cent supported in part by a further loosening of COVID-19 restrictions.

The World Bank Group meanwhile expects the Kenyan economy to grow at a 6.9 per cent high this year and ahead of all peer economies in Sub-Saharan Africa.

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