Economy

Uhuru’s Sh25bn stimulus for jobs before elections

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President Uhuru Kenyatta. FILE PHOTO | NMG

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Summary

  • The stimulus package will mainly seek to widen the market and offer better produce prices to tea, coffee, sugar, livestock farming -- sub-sectors that are critical in putting money in peoples’ pockets.
  • The President also announced the third phase of Kazi Mtaani, a Sh10 billion plan that will offer 200,000 youths menial jobs.
  • He directed the allocation of Sh8 billion for construction of schools using local contractors and labour, seen as another attempt at boosting cash flow at the grassroots.

President Uhuru Kenyatta Wednesday unveiled a Sh25 billion economic stimulus package to jump-start the economy, create jobs and pacify his political base ahead of the 2022 General Election.

The stimulus package will mainly seek to widen the market and offer better produce prices to tea, coffee, sugar, livestock farming -- sub-sectors that are critical in putting money in peoples’ pockets or improve purchasing power.

The President also announced the third phase of Kazi Mtaani, a Sh10 billion plan that will offer 200,000 youths menial jobs in an economic setting where people below the age of 25, mainly secondary school and college graduates, have been the hardest hit by job cuts.

He directed the allocation of Sh8 billion for the construction of schools using local contractors and labour, seen as another attempt at boosting cash flow at the grassroots.

The choice of key cash crops in Mr Kenyatta’s bailout suggests he is keen to calm the restive rural Kenya that has suffered the brunt of the sluggish economic activity and reduced cash in circulation.

The Treasury has been directed to allocate Sh1 billion each to support tea and coffee sub-sectors while sugarcane and livestock will receive Sh1.5 billion each.

Nearly 730,000 jobs were lost last year when Kenya imposed coronavirus-induced lockdowns that led to layoffs and pay cuts, but the country’s economy is presently recovering.

Economic output contracted for the first time in nearly three decades last year, pummeled by the impact of the coronavirus crisis that hit key sectors such as tourism.

The bailout plan comes amid a growing power struggle between the President’s allies and those of his deputy, William Ruto, who considers himself the heir apparent.

Mr Kenyatta had said during the last election that he would support Dr Ruto in 2022, but is leaning towards to veteran opposition leader Raila Odinga.

The economy and household welfare have taken centre stage in the early campaigns, with protagonists selling their social protection plans.

Mr Kenyatta is also racing to cut electricity and fuel prices through subsidies to defuse public outrage as ordinary Kenyans express concerns over reduced cash flow, fewer employment opportunities and rising cost of living.

“The first and second stimulus packages were designed by my administration to ensure that our economy could endure shocks occasioned by the lockdown measures,” Mr Kenyatta said yesterday at a public meeting attended by Dr Ruto and Mr Odinga.

“[We] Will be rolling out the third financial stimulus designed to accelerate the pace of economic growth and sustain gains already made.”

Mr Kenyatta announced that the Sh1 billion allocated to the tea sub-sector will go towards a fertiliser subsidy while the money allocated to sugarcane will be used for factories maintenance and payment of farmers’ arrears.

In the coffee sub-sector, the funds will be used for the ongoing reforms and other targeted interventions.

The Sh1.5 billion earmarked for the livestock sub-sector will be used to support communities who are facing drought and the purchase of livestock ravaged by poor weather.

Mr Kenyatta also directed the Agriculture Cabinet Secretary to work jointly with the Treasury on a framework that will facilitate the reduction of the cost of animal and chicken feeds within the next seven days.

The shortage of ingredients has seen the price of feeds, especially for poultry, more than double this year, forcing many farmers to cut back production.

Agriculture is Kenya’s dominant sector and employs the majority of Kenyans, underlining its huge potential to put money in people’s pockets and ultimately boost other service providers of items like beer, airtime and newspapers with demand.

Yesterday, the President also lifted the nationwide curfew that has been in place since March 2020 to curb the spread of the coronavirus.

The removal of the curfew will offer a further boost to the economy, with the hospitality, retail and the transport sectors being key beneficiaries.

Mr Kenyatta said infection rates had fallen, with less than five percent of tests each day proving positive.

Kenya’s economy, like others, has been hurt by the pandemic, as restrictions to curb the spread of the coronavirus reduced revenues and stifled growth.

Growth slid to negative 0.3 percent last year from 5.0 percent in 2019.

Recovery has started, but there are fears the pace could be curbed by a shortage of Covid-19 vaccines and new waves of infections.

Growth is expected to be 6.1 percent this year and 5.6 percent in 2022, according to the Central Bank of Kenya (CBK).