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Actions Taken To Safeguard The Kenyan Economy

Actions Taken To Safeguard The Kenyan Economy

 

 

 

 

 

 

 

 

BY RITESH BAROT

Welcome to the month of June 2020. During the past five months, the Kenyan economy has been resilient through the first wave of the locusts’ invasion (January 2020) however, with the second wave swarming, the full effects of locust invasion(s) are yet to be realised. The Covid-19 pandemic is having repercussions on the economy, majorly affecting the hospitality and tourism industries. The month of June and subsequent months are going to be strained for the global economy and economic development outcomes are inclined to be considerably affected. There is naturally great anxiety that the income shocks to the low-income households can turn into a crisis of malnutrition across the nation, particularly at this time when healthcare and essential services are under great stress. Kenya has over the recent past conquered famine situations and continues to be resilient. The government is currently carrying out sectoral analysis in partnership with major industry players to identify industries which can manage to run at reduced activity levels given the current pandemic situation.

On the investments front, HE President Uhuru Kenyatta approved the Tax Laws Amendment Act 2020 last month, raising the cost of investing in equities and securities at the NSE. Charges for shares and derivatives brokerage commissions will attract Value-Added Tax (VAT). Others include advisory fees charged for placement, Initial Public Offerings (IPO’s), rights issues and takeovers. Bond turnover in the secondary market at the Nairobi Securities Exchange (NSE) fell to its lowest level April as activity across the market slowed down on greater restrictions due to Covid-19 pandemic. During the month of May, the NSE index has not witnessed much momentum. Having said this, it is the right time for investors to purchase shares of listed blue-chip companies which are underpriced, especially keeping in mind a long-term investment strategy.

In recent news, Kenya’s debt payment commitments will reduce owing to lower interest charges and a longer repayment period. On 20th May 2020, the World Bank disbursed a $1 billion (Kshs107 billion) loan to Kenya for budgetary support and to help confront the Covid-19 threat. This loan is to help close the fiscal financing gap, while supporting reforms that help advance the government’s inclusive growth agenda (Big Four Agenda), including in affordable housing and support to farmers’ incomes. Last year, World Bank also gave Kenya Kshs 75 billion loan for budgetary support.

In order to assist the SMEs with an aim to reduce levels of unemployment, and to get the economy back on track, the Treasury will lend money to banks at subsidised annual interest rates, thereby enabling the banks to offer loans at below seven percent — lower than the average market rate of 12.1 percent. This scheme is intended to help traders including hotels, and firms in the service industry alongside other SME’s which have had to halt operations under coronavirus lockdown measures. This support is crucial as small firms, particularly those in informal sectors, are responsible for the largest aggregate numbers of jobs in Kenya and have over time emerged as the biggest drivers of new employment prospects.

Kenya being the silicon-savannah in Sub-Saharan Africa will see many organisations utilise this time to maximise the potential of innovative digital technology to make supply chains more effective. Furthermore, fiscal measures are being gradually introduced by the government to support the economy.

I wish all readers safety. Please follow the regulations issued by Ministry of Health.

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