A LOCKDOWN WILL ONLY HURT KENYANS’ POCKETS MORE

By Isaac Mwaura

President Uhuru Kenyatta came up with a raft of measures to cushion the Kenyan economy from the ravages of Covid 19, and it’s quite refreshing to note that some of the suggestions that were made in this column last week were greatly considered. 

All the major global economies have come up with a stimulus package since when they sneeze, we literary catch a flu like the coronavirus. 

Kenyans have defied govt orders to stay at home, because majority of them live from hand to mouth, as they are watu wa vibarua au biashara ndogo. To put this into perspective, we need to look at our economy in totality.

The US has announced a Kshs 84 trillion kitty to cushion its citizenry from the effects of the pandemic, translating to approximately Kshs 100,000 per person. 

The amount is more than 28 years of our national balanced budget,  as the dollar is not only a reserve currency, but the US is the only country that can literary print money. 

If Kenya was to do that, it could only give Kshs 100,000 to its poorest 15 million people only, amounting to Kshs 1.5 trillion, completely exhausting our current annual national ordinary revenue. 

Kenya is however not a social welfare state, leave alone matters affordability. Our fiscal space has allowed only 7.387,674 billion as an emergency kitty occasioned by the unreturned Kshs 1,000 note due to demonetization. This is the only money that Kenya can ‘print’.


The President has however proposed a cash transfer boost of Kshs 10 billion for the elderly, orphans and other vulnerable groups.

The Kenya Association of Manufactures (KAM) had asked the govt for a 30-15% reduction on corporate tax and zero VAT rating on essentials to shield economy from coronavirus meltdown. 

The President has responded by providing for a reduction of the corporate tax from 30 to 25% and a further reduction of VAT from 16 to 14%, in addition to a Kshs 10 billion facility for verifiable VAT refunds. Hopefully, this will lead to stable or reduced prices for goods and services including food.

In addition, more than 70% of Kenyans earn less than Kshs 25,000 and this will affect PAYE revenue greatly due to the 100% waiver.

Treasury has revised its economic growth projection from 6.1% to a low of 3.6% owing to the looming global recession, though CBK’s projections are more bullish at between 4-4.9%.

 The Parliamentary Budget Office (PBO) which had a more realistic projection of 5.6% needs to midwife this and give Kenyans figures that parliament can use to make informed deliberations.

Nevertheless, this means that our total revenue collection for this and next year shall reduce significantly, owing to these two factors i.e. reduced economic growth and significant reduction in taxation.

Further, the challenges of having 80% of all jobs in the informal economy means that majority of Kenyans aren’t within the tax bracket. It is therefore difficult to put in place I intervention measures targeting them directly, without causing further shocks to the economy. 

KRA and county govts therefore need to devise means of bringing them onboard especially through business development services in conjunction with both formal and informal financial lenders.

The reduction of the CBR and bank reserve rates to 7.25 and 4.25 % respectfully will release Kshs 35 billion into the economy, in order to increase market liquidity, and hopefully reduce the interest rate to 10% or lower.

The National treasury and KRA will be hit hard, With all these goodies that the govt has issued out, There is therefore need to calculate revenue forgone and the impact on both the Division of Revenue Bill (DORB) and the County Allocation of Revenue Act (CARA), to avoid amongst others, a tag of war between the Senate and the National Assembly. 

The Kshs 316 billion proposed allocation to counties may be untenable, and county  governments will therefore have to rely on their Own Source Revenue (OSR), which they always over-project and under-declare, if they are to remain afloat.

Calls for reduced pay for legislators will increase during these hard times, while the demand for hand-outs from them will increase, especially after the executive took a pay cut. Maybe a one-time check-off contribution from parliamentarians, governors and MCAs would be welcome as well.

Over and above the health crisis, we need to continue having a serious conversation about the state of our economy if we are to get out of the bottom of the global food chain.

1. The Covid 19 disruption calls for creativity as it portends a new global economic order and only those countries that will devise a quick recovery plan will be able to leap forward.

Considering all the factors above, our country cannot therefore afford a total lockdown as it will only hurt the pockets of many Kenyans more, and BBI referendum campaigns can only make matters even worse. We all need to be responsible, for if you want to win the world, melt it, do not hammer it. 

The writer is Vice Chairman of the Senate Committee on Finance and Budget