STRATEGY

Treasury to cushion tourism, trade in recovery plan

Government to lift ban on holding meetings in private hotels

In Summary

•The state will provide support for hotel renovations through soft loans to be channeled through the Tourism Finance Corporation.

•The government is also implementing a waiver of landing and parking fees to facilitate movement of cargo, both air and sea.

National Treasury Cabinet Secretary Ukur Yatani./FILE
National Treasury Cabinet Secretary Ukur Yatani./FILE

The government in collaboration with tourism stakeholders is coming up with protocols that will ensure gradual reopening of the tourism sector, National Treasury CS Ukur Yatani has said.

Government will also provide temporary support to enable horticultural farmer’s access the international markets, among other measures to cushion the economy from effects of Covid-19.

Some of the measures that the government is progressively rolling out to support recovery of the tourism sector include temporary lifting of the ban to hold meetings in private hotels, till the end of the pandemic.

The government had last year banned use of private facilities as an austerity measure to cut on wastage.

It insisted all state related meetings, training and workshops be held in government institutions.

In his talking notes for an interview with Reuters on Friday, seen by the Star, Yatani said the government is also implementing a waiver of landing and parking fees, “ in order to facilitate movement of cargo, both air and sea, in and out of Kenya during and after the pandemic period.”

This will boots fresh produce exports.

The country's horticultural sector, mainly flowers, has been hard hit by disruptions in international travel and closure of key markets in Europe in the wake of the coronavirus.

The markets are however slowly opening up with demand for fresh produces growing.

Transport CS James Macharia a week ago said the government has approached 12 airlines to complement the efforts of Kenya Airways in keeping horticulture export business afloat, a move that will also ensure jobs in the sector are saved.

 

“We have approached 12 other airlines to make sure they can complement the two freighters owned by Kenya Airways,” Macharia said at one of the daily government briefings on Covid-19.

Meanwhile the government will support the hotel industry including availing a credit facility to help with renovations.

The sector has been thrown into a spin with hundreds of hotels closing across the country, as more than 50,000 workers remain at home on unpaid leave.

“We will provide support for hotel renovations through soft loans to be channeled through the Tourism Finance Corporation and promoting aggressive post Covid-19 tourism marketing,” Yatani said.

He said while Covid-19 is largely a health sector issue, its impact to the domestic economy is also being felt in trade, which has been disrupted mainly on imports from China and the rest of the world, as well as exports to Kenya’s trading partners.

Tourism services have been affected following hotel cancellations occasioned by lockdowns and travel bans.

The transport and storage services has been affected due to low demand for transportation of imported goods as well as exports.

“The agriculture sector has been affected by the low global demand for agricultural exports especially horticulture, tea and coffee,” CS Yatani notes.

Manufacturing and construction remain hurt as a result of subdued importation of intermediate goods, while the financial services if experiencing reduced remittances from the diaspora.

There is also reduced investment flows in the capital markets and potential flight by investors from the capital market, Yatani said, and elevated non-performing loans in the banking sector.

Taking into account the impact of Covid-19, the projected growth for 2020 has been revised downwards to 2.5 per cent from the baseline of 3.0 per cent and the initial projection of 6.1 per cent in the 2020 Budget Policy Statement.

“Should the pandemic persist, this growth is likely to drop further to below 2.5 per cent,” Yatani said.

The economy is however expected to rebound in 2021 and 2020 to grow at 5.8 per cent and reach 6.5 per cent by 2024.

This growth will be driven by the services sector, the industry sector as well as the primary sector.

In 2019, the economy expanded by 5.4 per cent from 6.3 percent in 2018, the Economic Survey 2020 indicates.

“The impact of Covid-19 is expected to negatively impact the economy through reduced demand for goods and services, low levels of production, reduced importation of goods services and ultimately leading to job losses,” Yatani said.

To cushion Kenyans and the economy from the negative impact of the pandemic, the government introduced a number measures under the Tax Laws (Amendment) Act 2020, among them reduction of VAT from 16 to 14 per cent.

Employees earning less than Sh28,000 a month are now enjoying a 100 per cent Pay As You Earn (PAYE) tax relief.

Those earning above this threshold will benefit from a PAYE tax reduction of between 30 and 25 per cent. Corporation Tax has also been reduced to 25 per cent.

Yatani said the Finance Bill 2020 contains proposals that will also support the common Mwananchi include amendments to Income Tax Act to raise the upper ceiling of monthly rental income that is subject to the 10 per cent monthly rental income rate to Sh15million per year, from Sh10 million.

This, the CS said will lower the rental tax burden to landlords that earn more than Sh10 million annually by removing them from the category paying rental income tax at the corporate rate of 25 per cent.

Landlords currently earning between Sh10 million to Sh15 million will be paying rental tax at the rate of 10 per cent.

“Effectively, this will leave them with more money to spend and stimulate the economy. This will help to lower monthly rent to various tenants who are adversely affected by the Covid-19 pandemic,” Yatani said.