This archive report was first published on 21 April 2020.
As the Covid-19 pandemic continues to ravage the world, Kenya's economy is facing an unprecedented crisis. According to the National Treasury, the economy is expected to contract by at least 50 percent, a projection that is both alarming and critical.
Published on April 21, 2020, the National Treasury's revelation highlights the need for the government to take proactive measures to cushion the economy. The projected decline in economic activity will have far-reaching consequences, including a significant knock on the country's real GDP, employment, industrial input, real income, and wholesale/retail sales.
Already, the signs of contraction are evident. Many businesses have closed down, economic growth has slowed down, and people are losing their livelihoods. If the pandemic drags on for a long period, the situation could worsen.
Policy makers and institutions, including the central bank, must take immediate action to mitigate the effects of the pandemic. They should plan ahead for recovery, focusing on boosting job creation, restoring demand for goods and services, and helping both private and State agencies to seal the dents in their respective balance sheets.
Targeted monetary and fiscal policies are needed to protect both households and businesses. Providing sound fiscal stimulus packages will be helpful, and policy makers should urgently identify areas where such support will have maximum impact. Strategies such as tweaking tax rates and payment schedules are important options at this time and should be considered.
The government should also reach out to international financial institutions to provide grants and concessional financing, ensuring sufficient cash to finance the recovery phase. It is encouraging that Kenya is already engaging with the International Monetary Fund for financing facilities to supplement its official foreign exchange reserve and budget support.
