Kenya’s trilemma: Covid-19 pandemic, floods and locusts

Kenya’s policymakers are in for a difficult balancing act as floods complicate social distancing rules in the wake of coronavirus pandemic in a country that is staring at food shortage due to locust invasion.

The three challenges have hit the country back-to-back, posing a difficult balancing act for government given the limited resources.

Before the three challenges, Kenya was in the middle of pursuing fiscal consolidation measures to reduce budget gap and cut on debt appetite. This has, however, been thrown into disarray with every must-do move seen to either cut revenue or raise spending.

The government has responded to Covid-19 through enforcement of social distancing rules including ban on gatherings such as meetings and introducing 7pm to 5am curfew.

This is in addition to economic stimulus package that has lowered valued added tax (VAT) from 16 percent to 14 percent, exempted income below Sh24,000 from pay as you earn and lowered corporate tax from 30 percent to 25 percent.

But the hit on the economy continues to be felt, with many firms announcing job cuts, unpaid leaves and hiring freeze in the wake of disrupted business activity.

Central Bank of Kenya (CBK) Governor Patrick Njoroge, who recently remarked that it was important to solve the health crisis without causing a financial crisis has not shied away from expressing how dire the situation is.

“I am worried about job losses in the US. Because I am very worried about job losses in Kenya. Policymakers in Kenya and similar countries need to assess the magnitude of the incoming- is it a regular wave we can ride through or it is a tsunami,” he said in a tweet late March.

This captures the crossroads in the minds of Kenyans now, as the government moves to reorganise budget to address the virus, floods and locust threat.

Coronavirus cases in Kenya had hit 384 on Wednesday, with Ministry of Health model suggesting infections could rise to 10,000 by the end of the month.

This has forced the government to make huge sacrifices to support the economy. Now CBK projects growth could slow to 3.4 percent, marking the slowest expansion in 12 years.

It has not helped that Kenya has announced a series of measures to lower tax burden in response to the virus.

National Treasury Cabinet Secretary Ukur Yatani said he expects these measures to leave the country with a Sh172 billion revenue hit.

FRESH HEADACHE

Already, New York-based credit rating agency Fitch Ratings is tipping Kenya’s budget deficit to widen to nine percent, the largest in four years, as the government implements these revenue cutting measures to support citizens.

With the virus still making headlines in 210 countries and territories around the world, where it has infected over 3.2 million people and killed over 227,000, policymakers are unanimous that the dark cloud still hangs over the economy.

This, coming at a time Kenya is entering its season of long rains that promises to be problematic. The floods have already swept houses, livestock and crops and caused death and injuries.

All the seven fork dams — Masinga, Kamburu, Kitaru, Kindaruma and Kiambere — are now carrying maximum water, the government recently warned.

This means that the threat of floods and mudslides has been heightened in places such as Murang’a, Taita Taveta, Elegeyo Marakwet, West Pokot, Garissa, Kitui and Tana River.

“All our dams are full to the maximum and there is spillage already from Masinga, down to Kiambere. There is overflow of over 300 cubic metres per second in all dams,” said Energy Cabinet Secretary Charles Keter.

Floods are seen as weak link in the fight against further spread of coronavirus disease given that it leads to displacement of people, forcing them into camps, which makes it difficult to observe sanitation and social distancing.

This will also require another special budget from the government, giving policymakers fresh headache. For instance, the 2018 floods forced the State to set aside Sh60 billion to respond through food aid and repair of infrastructure.

FOOD SECURITY

The invasion of desert locusts at the beginning of the year had been seen by National Treasury as the key threat for growth especially for agriculture.

However, the discovery of the first case of Covid-19 in Kenya on March 13 has dwarfed the locust risk, yet it remains a key threat for the country’s food security.

More than 20 counties — including Mandera, Wajir, Samburu, Isiolo, Garissa, Baringo, Turkana, Laikipia, Meru, Kitui, Embu, Machakos, Murang’a, Makueni and Kajiado — have been infested by the crop destroying insects.

Food and Agriculture Organisation reiterated its warning for Kenya to brace for a second wave of desert locusts, 20 times bigger than the first one, come May.

This could hit the country’s food basket areas at a time government is already warning of looming shortage of maize in the country.

The Strategic Food Reserve Oversight Board had in March issued an advisory for importation of two million bags of white maize before May to curb a possible flour crisis.

A dire situation could also see government give up part of excise duty to allow importers to bring in the commodity at lower price and shield consumers from high prices as was done in 2017.