President’s tax relief will cushion Kenyans and businesses

KNCCI president Richard Ngatia addressing the media. [Stafford Ondego/Standard]

By announcing a raft of rescue plans to cushion Kenyans uncertain of what the future holds following coronavirus ravages, the package by President Uhuru Kenyatta provides a huge relief to critical players.

The economic stimulus is a welcome relief to Micro, Small and Medium Enterprises (MSMEs) and all Kenyans in general burdened with credit facilities.

As an essential component to growth and development of small scale traders, the government temporarily suspended the listing with Credit Reference Bureaus (CRB) of any person and corporate entities whose loan account fall overdue or is in arrears with effect from April 1, 2020.

Just as the President expressed confidence amid the ongoing impact of coronavirus, faithful and strict implementation of the safeguards guarantees to make Kenya maintain its status as a regional economic hub.

By lowering the Central Bank Rate (CBR) to 7.25 per cent from 8.25 per cent, commercial banks are expected to lower the interest rates to their borrowers and availing the much needed and affordable credit to MSMEs across the country.

The second measure by the regulator to reduce the Cash Reserve Ratio (CRR) to 4.25 per cent from 5.25 per cent will further provide additional liquidity of Sh35 billion to commercial banks to directly support borrowers who are distressed as a result of the economic effects of the Covid-19 pandemic.

Effectively, this will enhance liquidity and more cash flow and forestall cash crunch in the economy. The move by CBK now makes it possible for Kenyans who will find it difficult to service their personal loans due to the government directive to maintain the social distance and work from home and request their banks to extend repayment period by one year.

The onus is now on CBK and commercial banks to ensure adequate supply of affordable credit to help businesses soften the impact coronavirus has brought.

On the other hand, the directive to all ministries and departments to settle at least Sh13 billion of the verified pending bills within three weeks is expected to largely improve liquidity in the economy and ensure businesses remain afloat by enhancing their cash flows.

In the same breath, the private sector has been encouraged to play its part and clear all outstanding payments among themselves within the same time frame.

Other measures the government has taken to protect Kenyans include reduction of Pay-As-You-Earn from 30 per cent to 25 per cent as well as reduction of Resident Income Tax (Corporation Tax) from 30 per cent to 25 per cent.

To account for one of the biggest employers in the country, the government initiative to effect a reduction of the turnover tax rate from the current 3 per cent to 1 per cent for all micro, small and medium enterprises will also lead to a substantial economic contribution.

All these interventions and with exemplary ways in which the government has put in place policy measures and behavioral protocols geared towards limiting the spread of the disease, Kenya is surely on the right track to combat the global crisis.

As businesses deal with the ongoing impacts of the coronavirus pandemic in the coming months, the most important things we can do as Kenyans is to stay calm and follow the advice from health professionals.

As always, the private sector players under the umbrella of the Kenya National Chamber of Commerce and Industry (KNCCI), are ready to assist the government roll out additional measures including searching for new markets and boosting value addition among our local businesses.

The writer is president of the Kenya National Chamber of Commerce and Industry.