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Ready economy for new global order

Friday March 27 2020
KIPPIC

Iraqi health workers spray disinfecting liquid in the streets of the centre of the southern city of Basra on March 25, 2020, in a bid to slow down the spread of the novel coronavirus that causes the Covid-19 disease. PHOTO | HUSSEIN FALEH | AFP

By KIPRONO KITTONY

It has been a tumultuous start to 2020.

Barely three months into the year, and with Kenya’s economy yet to fully recover following a sluggish 2019, prospects have taken a sharp downturn globally over the Covid-19 outbreak.

African countries like Kenya and South Africa are grappling with a pandemic that German Chancellor Angela Merkel says is her country’s greatest challenge since Second World War.

The global price of crude oil has cratered to lows of $20 (Ksh2,122) per barrel, levels last seen in the 70s when there was a global oil crisis.

Experts warn it could go much lower, and global markets, including the Nairobi Securities Exchange (NSE), are on a sharp free fall as an increasing number of countries go on lockdown.

TIMELY INTERVENTIONS

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As bad as this looks, Kenyans should not panic. This is the right time to confront the facts about the Covid-19 pandemic and take decisive action.

Thankfully, this is a responsibility that our government has taken up with the seriousness it deserves. There is broad consensus that the government’s response to the pandemic has so far been commendable.

The media has also been responsible and effective in disseminating accurate and timely information. Now is not the time to rest on our laurels.

We need to make timely interventions that will not only insulate Kenyans from the unfolding economic shocks but also enable our economy to remain competitive in the post-Covid global order.

To save our economy, which supports close to 50 million Kenyans as well as dozens of global organisations, we need to re-evaluate our economic and development policies, cognisant of the ripple effect that an unmitigated economic meltdown will have on the state of law and order and our social fabric.

FINANCIAL RELIEF

Leaders from the government, the private sector and the broader business community, as well as policy experts and development partners, need to work collaboratively to secure Kenya’s economic future in these critical times.

It is encouraging to see that banks and the wider financial services community, including telcos that provide financial services like Safaricom, have taken a slew of measures to cushion their customers, including fee reduction and loan restructuring.

This is a positive move for cash-strapped SMEs that badly need financial relief.

The next focus should be on strengthening the digital economy, which will be instrumental in supporting our economy in these unique times when people are called to practice social-distancing and self-isolation.

Other measures that the private sector and business community can take to mitigate the unfolding impact of Covid on the business environment is to discourage layoffs and instead opt for negotiated pay adjustments.

Unions should be supportive of this. The last thing any household needs right now is loss of income.

TAX CUTS

The government, through the CBK, should now consider relaxing the monetary policy to stimulate the flow of affordable capital into key economic sectors, taking a leaf from institutions such as the US’s Fed and European Central Bank that successfully adopted quantitative easing to resuscitate their economies following the 2008 Global Financial Crisis, and that are currently pumping liquidity into their economies in the wake of Covid.

This requires joint support from businesses and the government to curb price increases and contain inflation.

The Treasury should work closely with Kenya Revenue Authority to institute tax cuts for players in critical sectors of the economy.

Now is the time to live up to the spirit of the ‘Big Four Agenda’ and unleash liquidity for critical sectors like manufacturing, healthcare and agriculture through tax cuts or suspension of various taxes.

The government’s focus on healthcare must be particularly strong right now, not just because it is a Big Four pillar, but also because we need to encourage mass testing, counselling and public awareness.

DEFINING MOMENT

The final intervention that’s needed is for the government to maintain an open-door policy for the private sector and wider business community.

Now is the time to work together to find common solutions to this common challenge facing us all.

The political class must also be meaningfully involved in securing our economy. It is said that nothing brings people together more effectively than common challenges.

Now is the time to find timely political solutions such as developing the legislative framework to equip the government with financial and technical resources to intervene in these trying times.

This is the best time for leaders from all circles to demonstrate true leadership in tackling this pandemic.

Mr Kittony, a business leader, is vice-chair of World Chambers Federation. [email protected]

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