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Ideas & Debate

EDITORIAL: Fiscal incentives will be the real deal for Kenyan firms

The CBK
The CBK. Governments and central banks are going flat out to cushion economies using both fiscal and monetary stimulus. FILE PHOTO | NMG 

This week, Donald Trump, the president of the world's largest economy, announced a $1 trillion stimulus package that will go directly to households and the small firms. This is meant to cushion the US economy against the impact of the coronavirus pandemic.

The Fed and most central banks have weighed in with a cut on the policy rate.

Elsewhere, in Italy mortgage payments have been suspended.

In short, governments and central banks are going flat out to cushion economies using both fiscal and monetary stimulus. That much is expected in Kenya for very localised reasons.

One, we are seeing dark clouds gathering around the grounded hospitality industry that normally has a huge multiplier effect on all sectors.

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We can expect to hear the worst from the struggling Kenya Airways, hotel and restaurant establishments, tour operators and the whole supply chain extending to food suppliers and transport industry.

Two, imports are falling with the impact being felt in the small and medium enterprise (SME) haven of Nyamakima, Nairobi to everywhere on the ground.

Third, horticultural exporters are facing a lockdown in destination markets as well as the supply chain. Layoffs are coming.

So far Central Bank of Kenya has rolled out some incentives to the economy whose burden appears largely borne by bank shareholders — and probably mobile companies who will waive fees for amounts up to Sh1,000.

Among them is suspending electronic bank transfer fees and yesterday, directing banks to extend SME and personal loans for those "up to date as of March 2, 2020" by a year. Hopefully, this will work.

However, the real deal will be fiscal incentives that should put money in pockets and firms.

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