Kenyatta and his deputy will take an 80% pay cut, while their ministers and their assistants will take pay cuts ranging from 20% to 30%.
The President also announced a raft of measures to save jobs and by extension the country’s economy.
- Slashed liquidity ratios, lowered interest rates, and a struggle to find a balance between social distancing and a largely informal economy, since the country’s first confirmed case two weeks ago
- A ban on imports of second-hand clothing, colloquially known as mitumba, a sector which employs tens of thousands across the country.
- Tax relief to low income earners (earning up to Shs. 24,000, ($240), and gave tax cuts to individuals, small businesses, and corporations.
- Suspension of the country’s three credit reference bureaus, which among them have about 2.5 million Kenyans negatively listed and unable to obtain credit from banks or fintech apps, beginning 1 April.
READ MORE: East Africa’s battle with Coronavirus
Coronavirus hitting Kenya
Kenya now has 28 confirmed cases of coronavirus, the second highest in the region after Rwanda that has 41. So it is working to halt further spreading across the country.
“Social Distancing is now our new norm, it is our new way of life,” President Kenyatta said on Wednesday. He also announced a nationwide nighttime curfew, the first in the East African nation since a failed coup in 1982, beginning on Friday.
Working closely with Kenyatta during this crisis is the newly appointed Health Minister Mutahi Kagwe. He also served in Kenyatta’s predecessor’s cabinet. Just barely two weeks into his new job as health minister, the country confirmed its first case.
Quick fix to the economy worrisome
The pillars of Kenya’s economy were already shaky at best before the pandemic made landfall in Nairobi, and the measures have just accelerated the path towards an economic collapse.
The country’s foreign and domestic debt obligations and development projects have strained its coffers, making it harder to manouvre.
Last week, the Central Bank released Shs. 7.388bn to the government to support the fight against COVID-19. The bank explained that the money was an “exceptional and unbudgeted windfall” that came from the value of notes that were rendered worthless after the Shs. 1000 note was demonetized last year.
While the money is a necessity, its origin has caused some anxiety given Kenya has essentially printed money.
The bank has lowered Kenya’s economic growth prospects for 2020 from above 6pc to “possibly 3.4pc.”
READ MORE: Rural time-bomb remains as Kenya reacts faster than UK to coronavirus
Fragile economy just before the virus
Last December, President Kenyatta said that foreign remittances from Kenyans in the diaspora -and presumably Kenyans in the gig economy – had brought in more than traditional top foreign exchange earners such as tea and coffee.
“To signify the changing fortunes of our homeland, diaspora remittances grew by 10.9% from Sh266.19bn to Shs.295.32bn between June 2018 and June 2019, overtaking earnings from export of tea and coffee as the country’s largest source of foreign exchange,” said the President.
While he didn’t mention it, the changes also coincided with the waiver window for Kenyans who have money stashed abroad to bring back home; with no (tax) questions to be asked.
Such remittances are likely to fall as global systems shut down, and people redirect money to more pressing concerns.
The Nairobi stock exchange, for example, hit a 17-year low within days of the first confirmed case, as investors dumped stock.
Pandemic touches horticulture and air travel
Horticulture, another one of Kenya’s primary sources of foreign currency, was already on the decline before the global shutdown. “Kenya’s earnings from horticulture exports fell 7% in 2019 to Shs. 142.72 bn ($1.37 billion)” Reuters reported on 18 March .
The pandemic shutdowns has already led to cancelled export orders, not just because of border closures, but also because there is simply no demand for flowers right now.
On Tuesday, the government-run Kenya News Agency estimated that flower farms had already fired over 2,000 people and would likely fire more as the situation worsens.
While there is still a market for fruits and vegetables, it is unlikely exports will be encouraged while the country is gearing up for a period of food shortages.
The country’s heavily-indebted carrier Kenya Airways, suspended all international flights on Wednesday. Its top managers will take a 75% pay cut, with the CEO taking 80%, as they navigate the current global crisis.
We are temporarily suspending all international passenger services effective 25/03/2020 until further notice. We apologise greatly to our affected customers for the inconvenience caused and look forward to serving you once again. For more info please visit https://t.co/UiibOSx8hi pic.twitter.com/O0Vlj1eUm6March 22, 2020
READ MORE: WHO’s Tedros: ‘Don’t abandon the poorest to coronavirus’
Short-term versus long-term losses
The global effects of the pandemic will most likely quicken the death of entire industries, but their the short-term effects remain more troubling right now.
Job losses from the formal sector were already bad before the pandemic, and are worsening as companies struggle to survive with lockdowns and general socio-economic distress.
Bottom line: In an open letter, economist and public intellectual David Ndii advised the Kenyatta administration to offer a lifeline fund for small businesses of “0.5 – 1% of GDP or Shs.50-100bn would be sufficient to save the situation.”
An Open Letter to President Uhuru Kenyatta— David Ndii (@DavidNdii) March 25, 2020
Re: COVID-19 in Kenya
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