The measures taken so far to contain the spread of the deadly coronavirus including the stay at home orders, closure of schools, shut down of courts and churches will undoubtedly harm the economy.
As we went to press, the impact of widespread fear, panic and social distancing on the streets of the capital city, Nairobi, were starting to show.
On Thursday, the major streets of Nairobi were less populated than usual, a sign that the message of social distancing was beginning to sink even without much prompting by authorities.
It is a worrisome trend because when the toll starts hitting the streets in the central business district of the capital city, the impact on consumer spending the lifeblood of the economy can be devastating.
In the current circumstances, an implosion in consumer spending can only come with devastating consequences for the economy, including layoffs and closure of businesses.
If the coronavirus pandemic deepens, the government will have no option but to implement bold emergency measures to stimulate the economy.
The circumstances will require a very aggressive fiscal policy response and capable of making an immediate impact.
The other day, we saw Central Bank of Kenya Governor Patrick Njoroge leading representatives of the Kenya Bankers Association to State House where they promised President Uhuru Kenyatta that commercial banks have agreed to tweak and relax conditions and terms of existing loans to support businesses and individuals who may be affected by the impact of the coronavirus pandemic.
Without a doubt, the gesture by the governor and the banks was not without merit.
However, what we need most right now are bolder emergency measures to stimulate the economy.
In the US, we have seen how their central bank — the Federal Reserve — has taken the unprecedented action to stimulate the economy by cutting interest rates to zero, buying $700 billion in bonds to stabilise financial markets and launching a commercial paper facility to ensure that companies have a market for their short term debts.
We should be discussing and debating whether or not our Central Bank should not come up with emergency measures as bold as we are seeing in other countries. I say so because elsewhere we are hearing how central banks are responding to the current crises by launching bond purchase and commercial paper buying programmes to inject liquidity immediately into banks and large companies.
The thinking is that the liquidity injected will be used to help companies with their fixed costs and make it possible for them to retain employees.
Why are we not discussing large-scale support for small business that will have lost customers and forced by circumstances caused by the coronavirus to shut their operations? Why are we not debating conditional cash transfers to the self-employed and informal sector workers?
Methinks that the coronavirus has opened an opportunity for us to experiment with a generalised and widespread cash transfer programme building on the experience of the Inua Jamii.
We should be thinking of how to put money directly into the hands of those who will be hurt most by the measures the government will be introducing as it fights to contain the virus. In America, they are thinking of mailing cheques to individuals and vulnerable groups.
Here, we are lucky to have very extensive mobile money payment platforms covering millions of shillings. An expanded cash transfer programme is how you can give the self-employed and informal sector worker forced to stay at home the means to support their families during the period of the pandemic.
And, what size of a fiscal stimulus package is appropriate for Kenya? I don’t know. But here are examples of what other countries are doing in terms of fiscal stimulus packages. The UK, £330 billion, France, €300 billion and Spain, €200 billion.
Calculated, the trends show that these countries have set aside fiscal stimulus packages amounting about to 15 percent of gross domestic product.