This archive report was first published on 24 May 2020.
On May 24, 2020, President Uhuru Kenyatta unveiled a Sh53.7 billion Eight-Point Economic Stimulus Programme to mitigate the effects of the Covid-19 pandemic on Kenyan families and businesses.
While the programme is a step in the right direction, it is woefully inadequate to address the scale of the crisis. African countries are estimated to lose more than half of their GDP growth due to the pandemic, with Kenya expected to lose a significant portion of its four percent GDP growth in 2020.
Comparing Kenya's stimulus package to those of other African countries, it is clear that it falls short. Namibia's plan was at 4.25 percent of GDP, Egypt at 1.8 percent, Ethiopia's at 1.6 percent, while South Africa has the biggest at 10 percent, but only half will actually be spent.
For Kenya, a two percent of GDP stimulus programme is around Sh200 billion. The Sh53.7 billion unveiled by the President is 0.5 percent of GDP, making it an underwhelming response to the crisis.
The biggest shock to the economy has been income shock, with people losing salaries and businesses shutting down. To address this, the government should focus on stimulating demand, but its plan falls short in this regard.
For example, South Africa plans to spend $5 billion to protect and create jobs, while Kenya's plan includes Sh5 billion to hire local labour and another Sh10 billion to engage 200,000 youths in restoring public hygiene. However, these measures are not enough to stem the loss of livelihoods.
The government also plans to make set aside Sh3 billion for affordable credit to SMEs, but this amount is peanuts compared to the scale of the crisis.
Lastly, the government's plan to enforce 'Buy Kenya, Build Kenya' in an economy whose demand-side is depressed is a clear indication that it is not in touch with reality.
