COVID-19: Kenya sees decline in April tax collections

Kenya Revenue Authority (KRA) has reported a sharp decline in tax collections for the month of April, with latest data from the Treasury showing a drop of nearly $190 million USD compared to the same period last year. The impact of the COVID-19 pandemic on the business environment in Kenya has led to a 14.46% decrease in tax revenue, with collections amounting to $1 billion USD in April. This significant drop in revenue collection reflects the challenges faced by businesses in the country as a result of the lockdown measures and economic slowdown caused by the pandemic. In addition to the decline in tax collections, Kenya Airways (KQ) also reported a loss of $130 million USD, further adding to the financial strain on the airline. Despite seeking a government bailout to navigate through the crisis, Kenya Airways has announced plans to resume passenger flights on 8th June 2020. Rodney Omukhulu, Assistant Investment Analyst at Cytonn, commented on the situation, highlighting the impact of the pandemic on businesses and the economy as a whole. He noted that the decline in revenue collection was expected, given the challenging business environment and reduced consumer spending. Omukhulu emphasized that the low revenue generation by businesses has translated to lower tax collections by the KRA, as many sectors such as restaurants have been forced to close or operate at limited capacity. Looking ahead, Omukhulu expressed concerns about the economic outlook for Kenya in the coming months. He pointed out that key economic indicators, such as the Purchasing Managers' Index (PMI), have shown a significant decline, indicating a downturn in the business environment. However, he also mentioned that if the government eases restrictions and stimulates economic activity, there could be a potential for business recovery. In light of the financial challenges faced by Kenya Airways, Omukhulu discussed the possibility of government intervention, including the potential nationalization of the airline to streamline operations and improve financial performance. While the airline has faced losses in recent years, there is optimism that with the right strategies in place, Kenya Airways could navigate through the current crisis. Addressing the impact of the pandemic on SMEs in Kenya, Omukhulu highlighted the struggles faced by small businesses, with reports indicating that three quarters of SMEs may not survive beyond June. He mentioned that the government has introduced measures to offer cheap financing through commercial banks to support SMEs. However, he emphasized that more intervention is needed from the private sector to prevent further closures of businesses. On the positive side, Omukhulu mentioned that May inflation has dropped to 5.5%, with expectations of a positive outlook for June. Factors such as declining fuel prices and favorable weather conditions are likely to contribute to maintaining inflation within the government's target range. Overall, the impact of the COVID-19 pandemic on the economy of Kenya has been significant, with challenges in tax collections, airline operations, and SME survival. As the government and private sector work to mitigate the effects of the crisis, there is cautious optimism for potential economic recovery in the coming months.