Cytonn’s Rodney Omukhulu explains measures Kenyan govt. is taking to curb COVID-19 impact on economy

With the COVID-19 pandemic presenting an unprecedented global health crisis, the Kenyan government has taken drastic measures, including pay cuts for top government officials, in a bid to cushion the country from the economic shocks arising from the pandemic. Rodney Omukhulu, Assistant Investments Analyst at Cytonn joins CNBC Africa for more.

Thu, 26 Mar 2020 15:09:40 GMT

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The reduction in PAYE taxes aims to provide households with more disposable income to cope with the economic impact of COVID-19.
The Nairobi Securities Exchange has experienced significant losses, creating opportunities for local investors to acquire stocks at reduced prices.
The Kenyan government's request for IMF assistance underscores the need for financial support to mitigate the effects of the pandemic on critical sectors and government operations.

The Kenyan government is taking decisive steps to address the economic challenges brought about by the COVID-19 pandemic. With the Nairobi Securities Exchange experiencing significant losses and businesses facing hardships, the government is reaching out to international organizations for financial assistance to mitigate the impact. Rodney Omukhulu, Assistant Investments Analyst at Cytonn, sheds light on the measures being taken and the potential implications for the economy. One of the key initiatives introduced by the government is a reduction in PAYE for employees, aimed at providing more disposable income for households to weather the current crisis. While some critics argue that the decrease from 16% to 14% may not have a substantial immediate impact, it is seen as a step in the right direction. However, there are calls for additional measures such as zero-rating essential commodities like food items to ease the financial burden on citizens. The move is designed to boost liquidity and consumer spending, thus stimulating the economy amidst the ongoing lockdowns and quarantines. Despite the reduction in taxes, concerns remain about potential price hikes in essential goods like rice and cooking oil. The government is working to stabilize prices and ensure affordability for all citizens. The Nairobi Securities Exchange has faced significant challenges, with local and foreign investors feeling the effects of market volatility. Foreign investors are reportedly divesting their holdings, creating an opportunity for local investors to acquire stocks at reduced prices. While the market outlook remains uncertain, there is optimism that the current situation presents opportunities for those willing to invest for the long term. Additionally, the Kenyan government has joined other African nations in seeking financial assistance from the International Monetary Fund (IMF) to address the economic fallout from the pandemic. The requested aid, close to 20 billion Kenyan shillings, is intended to support critical sectors such as healthcare and provide budgetary support to ensure stability in government operations. The funds will help bolster the country's response to COVID-19 and alleviate the financial strain caused by revenue shortfalls and increased borrowing. The government's proactive approach in seeking external assistance demonstrates a commitment to protecting the economy and supporting the welfare of its citizens during these challenging times. As the situation evolves, stakeholders are closely monitoring the effectiveness of these interventions and the overall recovery prospects for Kenya's economy.