COVID-19 ON ECONOMY

Uhuru should set up lifeline fund - Ndii

If people get hungry, the soldiers you love to turn to will not help you.

In Summary

• Drastic cutback on development projects 

• Mothballing nonessential functions thereby freeing up some non-wage recurrent budget.

President Uhuru Kenyatta live address from State House, Nairobi on March 25, 2020.
President Uhuru Kenyatta live address from State House, Nairobi on March 25, 2020.
Image: PSCU

Ten days ago, I expressed the opinion that the fiscal or monetary economic stimulus – what we call demand management instruments in economics – are not the appropriate response and argued instead for a “lifeline fund” to protect jobs. This approach has since been adopted by several countries including the UK, Denmark and the Netherlands.

What do I mean by “lifeline fund?” Let me use the simplest of examples – a hair salon or a barbershop. Hair grooming is the very opposite of social distancing – and it can certainly wait. But thousands of people depend on it for their daily bread (ugali and githeri more like it). Most live on a day-to-day basis. How are they surviving?

 
 

The lifeline fund is first and foremost, a safety net for workers like these whose sectors are most badly affected. This is the government responsibility just as it provides relief to drought and natural disaster victims. These people, particularly those in the urban informal sector, have nowhere to turn.

Secondly, the lifeline fund aims to keep businesses, especially those that are providing essential goods and services open instead of closing because of low business. We want to avoid shortages that could encourage hoarding, heighten social stress and drive up prices. Third, the more businesses we keep alive, the faster the recovery will be.

A file photo of economist David Ndii during an investment summit in Nairobi. /ENOS TECHE
A file photo of economist David Ndii during an investment summit in Nairobi. /ENOS TECHE

For people in Nairobi’s crowded informal settlements and elsewhere, who do not know where their next meal will come from, the language of social distance online working comes across as a cruel joke.

We already have a volatile powder keg of gross inequality and social exclusion, and as I already remarked, you personally have a reputation for elitist insensitivity. If people get hungry, the soldiers you love to turn to will not help you. Let us not tempt fate.

I have estimated that a lifeline fund in the order of 0.5-1% of the GDP or Sh50-100 billion would be sufficient to save the situation. But having already argued that it’s not prudent to borrow and spend, I am obliged to offer suggestions on how else this might be funded. I see two options.

The first is a budget reallocation within the existing deficiency by (a) drastic cutback on development projects and (b) mothballing nonessential functions thereby freeing up some non-wage recurrent budget.

Certainly, monies budgeted for international travel, workshops and public events can be redeployed immediately.

 

This will require political resolve and execution discipline, the lack of which,  has been the bane of your government.

The write up is part of Ndii's  open letter to President Uhuru Kenyatta