Diaz: The night will get darker before it brightens up

Nevertheless, 2021 will present better prospects for Kenyans by far in comparison to 2020.

In Summary

• The 2020 vision many proclaimed at the start of the year did not materialise as we instead round off the year on a blurry note.

• As the close of the year dawns, many hope 2021 will be the year of a resurgence as the world makes steps to trounce the pandemic. 

The 2020 vision many proclaimed at the start of the year did not materialise as we instead round off the year on a blurry note.

It is a year many want to forget and even delete if it were possible. For the younger, folk, this is perhaps their first-ever substantive disruption to their lives.

The majority of students particularly in primary and secondary school have for instance been out of school for a whopping eight months and that will stretch to nine months with resumption only set for January 4.

For the adults, it’s been a year of economic turmoil with millions losing their jobs, taking pay cuts and struggling to settle liabilities such as personal loans and monthly expenses.

For the lucky few, however, the global health crisis has presented the opportunity to set up their first business, grow their side hustle and even enrol online.

As the close of the year dawns, many hope 2021 will be the year of a resurgence as the world makes steps to trounce the pandemic. Nevertheless, a new year may not necessarily imply an end to what has been a rough economic environment.

Covid-19

The world is currently witnessing the peak of the second wave of Covid-19 infections which have proved to be more deadly in countries such as the United States.

In Africa, the continent continues to be largely spared from the full catastrophe even as cases and fatalities near three million and 70,000 respectively.

For Kenya, the second wave of infections has hit hard the country’s health sector as cases near 90,000 while fatalities climb to the 1,500 mark.

In recent weeks, Kenya has recorded an average daily infection count of 1000 and fatalities in double digits. The current status of Covid-19 won’t just float away in 2021, if anything, darker times may be gathering.

County Governors has, for instance, recommended the reinstating of tough Covid-19 restrictions as they fear a surge in infections in the grassroots during the festivities which largely feature temporarily urban to rural migration.

The measures on offer have already dampened economic prospects with more than 1.7 million Kenyans losing their livelihood to the pandemic according to labour statistics from the Kenya National Bureau of Statistics (KNBS).

Sectors such as tourism have been discriminately hit with international arrivals between January and October this year for instance falling by 72 per cent to a mere 470,971 from 1.7 million individuals at the same time last year.

The loss from the slump has been tabulated at Sh37 billion by the Tourism Research Institute (TRI) as a direct loss of revenues from the dip in international tourists.

Hopes for a vaccine roll-out, have however rekindled prospects for a rebound in 2021 with jabs by a number of pharmaceuticals including Pfizer/BioNTech, Moderna and AstraZeneca showing a strong efficacy for protecting individuals against the virus.

Beyond the approval for the vaccine, the timely distribution of jabs lies in limbo with tough conditions for costs and logistics such as the requirement to store the vaccine in freezing temperatures.

Moreover, developed economies have been tipped to get their hands on the antidote at a quicker rate buoyed by their financial might.

This will leave emerging and developing economies and Kenya prepares for the vaccine roll-out strategy in the future.

Ending relief

To cushion the economy against the effects of the pandemic, governments instituted both monetary and fiscal measures to ease the pain on Citizens.

For Kenya, the Central Bank and the National Treasury instituted key policies to shield Kenyans from the heat of the pandemic.

The CBK for instance requested banks to offer loan restructures to distressed customers while telco operators were required to waiver all fees on transfers below Sh1000.

Additionally, the reserve bank has retained the benchmark interest rate at seven per cent supporting cheap loan costs as Kenyans now pay the least for commercial bank loans in nearly four decades.

As of the end of October, commercial banks had restructured Sh1.38 trillion or an equivalent 46.5 per cent of their loan books to include Sh303.1 billion as loans to households.

However, the relief measures are now closing with loan restructures ending in March. Free cash transfers are meanwhile likely to end after December 31 while the moratorium on the listing of defaulters has since ended.

On the fiscal side, the National Treasury intends to close out tax relief measures on December 31 to include the return of old rates on pay as you earn (PAYE) and corporation tax.

The end of the relief measures, however, comes when the economy is yet to fully re-emerge from the pandemic hit as business closures, pay cuts and lower productivity in local firms persists.

Fiscal slippages

The darkest clouds will meanwhile be found in a weakened fiscal policy which now features growing budget deficits on lower revenue collection by the government.

Exchequer revenue collections through the first quarter of the 2020/21financial year have slumped by 15 per cent.

The National Treasury has partly attributed the slump to tax relief measures which it tabulated to cost the government at about Sh65 billion since April.

Lower revenues accompanied by greater spending by government has implied greater borrowing worsening an already dire debt crisis.

While Kenya’s debt remains sustainable, the International Monetary Fund (IMF) and the World Bank have raised questions on rising debt risks.

Kenya’s stock of public debt is estimated at Sh7.12 trillion and is seen breaching the Sh9.1 trillion red line by June of 2023.

The National Treasury is expected to keep running deficits and will be contracting more debt to meet higher spending requirements with the government expected to anchor growth as the private sector takes a battering.

The IMF has however recommended tough rules to Kenya’s access of loans including certain State parastatal reforms and budget cuts.

If effected, budget cuts are likely to end with lower economic prospects for the country as governments hold back against investment to anchor GDP progression The Private sector needs a lot of collaboration and continues to drive the economies in the Africa nations.

Nevertheless, 2021 will present better prospects for Kenyans by far in comparison to 2020.

Chris Diaz is Director EABC and Brand Africa Trustee