Uhuru rescue plan

National Treasury may present a mini-budget to address the impact of the deadly coronavirus.

This may involve deep state expenditure cuts as the country faces a revenue shock following reduced business activities in key economic sectors.

The radical measures are expected to feature in a rescue plan that will be announced today by President Uhuru Kenyatta.

National Treasury CS Ukur Yatani, who was cagey in revealing the rescue plan to be handed to the President, however admitted that the current government finances remain below expectations, and that his ministry might be forced to make some adjustments.

Cut spending

“We have come up with a proposal together with other five ministries and key State departments on how to withstand the impact of this crisis which the President will unveil,” said Yatani.

The Cabinet secretary said in case of a dip in revenue, then they might have to adjust spending.

“More importantly we have come up with proposals on how to withstand adverse effects,” added Yatani.

President Uhuru Kenyatta is expected to give the detailed rescue designed to stabilise the economy amid the coronavirus pandemic that has slowed down the business environment.

According to Yatani, the Head of State will also lay bare the impact of the pandemic, which has so far gutted a number of key economic sectors, such as tourism, horticulture, aviation and trade that have already seen their numbers dip.

The plan was prepared by five ministries and key State agencies and departments, which are at the heart of the country’s economic and financial well-being.

“We have looked at all this, what the situation is and how our fiscal position might have been affected,” said Yatani.

Besides National Treasury, other ministries involved in the emergency measures are the Ministry of Trade, Tourism, ICT and Labour.

The departments include the Kenya Revenue Authority, Kenya Institute for Public Policy Research and Analysis (Kippra), Kenya Bureau of Statistics and Central Bank of Kenya (CBK).

This comes at a time when the business community has called for broader measures from the government to help stimulate an economy that is slowly shutting down.

Players in the private sector have pushed for a stimulus package and tax cuts, noting that the economy risked a negative growth.

CS Yatani, however, did not rule out a mini-budget that could see possible drastic cuts in government spending to address the looming devastating effects of the coronavirus.

But the Treasury’s joint rescue plan, the CS said, will require the approval of the President before it is unveiled to Kenyans who expect more interventions to mitigate the lockdown that has harmed their daily lives.

The Treasury outline to be handed to Uhuru will provide a basis for the government technocrats to work from in unprecedented government response. This is likely to be broadened to include additional emergency that Yatani said would help cushion the business community and ordinary Kenyans against the overwhelming effects of coronavirus.

There are still seven confirmed cases in Kenya, against a global tally of 229,881. About 9,377 people have succumbed to the virus across the globe, while another 86,254 are reported to have fully recovered.

In the recent past, private sector players as well as economists have noted that cutting Pay As You Earn (PAYE) and Value Added Tax would put more money in the pockets of consumers. This, however, comes at a risk of starving the country of tax revenues considering that the two are among the biggest sources of income for Kenya Revenue Authority as well as the easiest to administer.

Kenya Private Sector Alliance proposed that income tax should be halved for anyone earning below Sh50,000 in the next six months, and a 20 per cent cut given to the rest.

Hotels and restaurants are leading the way in sending workers home as businesses ground to a halt following mass cancellations on travel, conferences and meetings.

For the hospitality industry, the gravity of the coronavirus pandemic has been instantaneous, with complete lockdown in several countries that are source markets for tourists.

The industry had sought an executive order waiving interest on outstanding loans, a move they said, would help them retain some jobs. Currently, the industry is prepping for a mass layoff with all the hotels running empty at the moment.

Political leaders also gave their proposals on the possible interventions to deal with the economic impact of Covid-19.

More sectors reeling from the pain caused by the virus, including horticulture, travel and manufacturing, are taking similar steps, sacking workers in part of what could be the start of a recession.

The private sector through their lobby Kepsa had proposed that government buys flowers from growers that now have to harvest and throw them away so as to cushion players and keep some of their employees at work.

Other leaders have noted that the government might have to either forego or defer payable taxes that are falling due, to enable businesses take care of their employees rather than lay them off.

Access to credit

Businesses continuously pay duties, including Value Added Tax, whose computation is declared every month.

VAT is payable by the 20th of every month, while employers are required to surrender the deducted employees’ income taxes by the 9th of the subsequent month. There have also been proposals to incentivise banks to provide loans urgently and at lower rates to companies to finance their operations and avoid massive layoffs.

Easing access to credit was among the concessions that banks agreed to in Wednesday’s State House meeting, even though only time will tell if the lenders would follow through on their pledge.

The businesses had also requested Treasury to set up a crisis fund to cushion businesses, which could come to the rescue of hard-hit industries such airlines, hotels and farmers, which may require bailout to save their businesses and retail jobs.