Coronavirus: How President Uhuru plans to rescue businesses, individuals

The effects of Corona virus is being felt drastically across businesses and the economy in Kenya and globally.

On March 25 the President of Kenya Uhuru Kenyatta addressed the Nation and pointed the following points the government will ensure to see the effects of the virus are minimised for survival of businesses.

• Reduction in VAT rate from 16 per cent to 14 per cent effective April 1 2020.
• A 100 per cent tax relief for people earning a gross monthly income of up to 24,000.
• Reduction of Pay As You Earn (PAYE) from its current maximum of 30 per cent to 25 per cent.
• Reduction of resident income tax / corporation tax from 30 per cent to 25 per cent.
• Reduction of current rate of turn over tax from 3 per cent to 1 percent.

Other Insights

• The government will appropriate an additional Sh 10 billion to the elderly, orphans and other vulnerable members of the society through cash transfers by the Ministry of Labour and Social Protection to cushion them from the adverse effects of Covid-19.
• Temporary suspension with Credit Reference Bureau of any person from Micro, Small and Medium Enterprises as well as corporates whose loan accounts fall due or in arrears effective April 1 2020.
• All ministries and departments shall cause the payment of at least Sh13 billion of the verified pending bills within 3 weeks of the date hereof to improve liquidity in the economy and ensure businesses remain afloat by enhancing their cash flows.
• Kenya Revenue Authority shall expediate the payment of all verified VAT refund claims amounting to some Sh10 billion within 3 weeks or in the alternative allow for the offsetting of Witholding VAT in order to improve cash flows for businesses.
• Sh1 billion from the Universal Health Coverage kitty be immediately appropriated strictly to the appointment of additional health workers to support in the management of spread of Covid – 19.
• The management of the  ferry service with immediate effect shall be vested in the National Police Service , Coast Guard and the National Government Administration Officers.

Central Bank of Kenya has rolled out the following measures: Lowering of CBR to 7.25 per cent from the prevailing 8.25 per cent, which will prompt commercial banks to lower interest rate to borrowers.

Lower of Cash reserve ratio to 4.25 per cent from the prevailing 5.25 per cent and this will provide additional liquidity of Sh35 billion to commercial banks that will enable to support borrowers that are distressed because of the economic effects of the virus.

It will provide flexibility to banks for loans extended or restructured due to the pandemic.

The writer Mohsin Adamjee is partner Nexia sj Kenya