Kenya's ecomomy growing at 2.6% - Treasury

Economy on rebound despite Covid-19 - Yatani

In Summary

•Treasury had earlier in May cut its economic growth prospects to 2.5 per cent, down from 6.2 per cent projected earlier in the year

•IMF) said Covid-19 pandemic had sent the world in the worst economic recession, projecting global economy to grow at negative 4.9 per cent

Kenya’s economy is growing at 2.6 per cent, the highest in the region, National Treasury cabinet secretary Ukur Yatani has said.

The exchequer chief attributed the positive growth despite tough social economic challenges that came with Covid-19 to the swift economic policy adopted by the government to respond to the scourge.

''We were forced to revise our economic growth prospects to negative one per cent in view of Covid-19. I am happy to report that we are currently at 2.6 per cent, highest in the region,’’ Yatani said at the National Covid-19 conference on Monday.

Treasury had earlier in May cut Kenya's economic growth prospects to 2.5 per cent, down from 6.2 per cent projected earlier in the year.

The CS said that the stimulus packages that saw the government forgo Sh172 billion in tax revenue on top of other measures to increase liquidity in the market helped to ease the heat of the pandemic.

In June, the International Monetary Fund (IMF) said the Covid-19 pandemic had sent the world in the worst economic recession, projecting the global economy to grow at negative 4.9 per cent.

The global lender also projected Sub Saharan Africa economy to contract by 3.2 per cent, reflecting a weaker external environment and measures to contain the Covid-19 outbreak.

It however expects the economy to recover to 3.4 per cent in 2021 subject to the continued gradual easing of Covid-19 restrictions and, importantly, if the region avoids the same epidemic dynamics that have played out elsewhere.

For instance, the National Treasury boss listed emergency measures announced by the Central Bank of Kenya (CBK) in March to boost liquidity in the market.

Some of those measures included the elimination of charges for mobile money transactions up to Sh1,000 and increased transaction limit for mobile money from Sh150,000  to Sh300,000.

The regulator also suspended the listing of Credit Referencing Bureau (CRB) borrowers owing less than Sh,1000 and gradually lowered the base lending rate from 8.25 per cent to 7.25 per cent and now at seven per cent.  

It directed banks to extend the loan periods for borrowers. This has since seen them restructure loans worth Sh844.4 billion by end of June, an equivalent of 29 per cent of their total loan book.

The apex bank reduced the Cash Reserve Ratio (CRR) to 4.25 per cent from 5.25 per cent, releasing Sh35.2 billion as additional liquidity availed to banks to directly support borrowers that are distressed as a result of the pandemic. 

In March, President Uhuru Kenyatta announced tax cut measures intending to increase household income by about 10 per cent and enable struggling firms enjoy a nine per cent shield against Covid-19 shocks.

He, for instance, announced a VAT reduction from 16 per cent to 14 per cent, offering relief to consumers, especially those in the informal sector and those without a guaranteed income.

It also reduced turnover tax for small and medium enterprises from three per cent to one per cent.

It includes 100 per cent tax relief for those earning up to Sh24,000, offering workers in that bracket an additional income of between Sh1,000 and Sh1,400.

Employees outside that band or earning more than Sh47,000 will enjoy five per cent tax cut, from 30 per cent to 25 per cent, injecting additional  cash of Sh4,241 and for those earning Sh50,000 and Sh7,229 for those earning Sh100,000.

Treasury also announced the Sh54 billion post-Covid-19 Economic Stimulus Package with Sh19.5 billion intended for development and Sh36.7 billion for recurrent expenses – putting more money in the pockets of wananchi.