COVID-19

Removing fuel taxes could boost economy

In Summary
  • Many workers in the informal sector are now out of work as a result of coronavirus.
  • Developed countries are spending billions on stimulus packages and social support to keep their economies running.
A 60-seater bus heading to Western with 40 passengers. Fares have been hiked from Sh600-700 to Sh1,200-1,500.
A 60-seater bus heading to Western with 40 passengers. Fares have been hiked from Sh600-700 to Sh1,200-1,500.
Image: DOUGLAS OKIDDY

The economic impact of Covid-19 is potentially crippling. Restaurants, hotels, bars and gyms are closed. Tourism and the hospitality industry are finished for the time being. Commodity prices are falling globally so Kenyan exporters will earn less. Thousands of Kenyan flower farmworkers have lost their jobs because of falling demand in Europe. 

The economic slowdown will hit informal sector workers harder than many others. They have no employers to provide short-term support.

The Central Bank has tried to help by asking banks to be patient with loan repayments until the crisis has passed. But that will have limited impact.

 
 

The economy needs a major stimulus package but the government cannot afford to pay laid-off workers 80 percent of their salary as in the UK or individual cash payments of $2,000 (SH212,644) as in the USA.

Once the worst of the virus has passed, government should consider an expanded employment porogramme like FDR's public works programme in the USA in the 1930s.

In the short term, government could consider temporarily removing VAT and excise tax on fuel which should reduce the cost of transport and most foodstuffs.

Quote of the day: "All things must change to something new, to something strange."

Henry Wadsworth Longfellow
The American poet died on March 24, 1882