The government should increase targeted fiscal injections to various sectors of the economy to generate jobs, protect vulnerable households and aid in a quicker post-pandemic recovery, policy experts have advised.
The Kenya Institute of Public Policy Research and Analysis (Kippra) said such measures would boost liquidity to both households and firms to support economic activities.
"This means that government is spending to ensure that the economic system doesn’t halt because it’s very easy for it to halt,” said Kippra Executive Director Rose Ngugi.
Kenya’s economy contracted to a 20-year low owing to the Covid-19 pandemic, with the services sector being the most hit.
Ms Ngugi was speaking yesterday during the release of the annual Kenya Economic Report, 2021 themed Kenya in Covid-19 Era: Fast-Tracking Recovery and Delivery of the “Big Four” Agenda.
"The pandemic deflated the balloon. It’s not the private sector that will breathe in the air, it’s the government’s task and that’s why it makes sense that government was running up and down looking for funds to maintain the economic system,” she said.
Since Covid-19 was reported in Kenya in March 2020, President Uhuru Kenyatta’s government released at least three stimulus packages to help the economy recover.
The economy is also expected to benefit from continued spending on the Big Four Agenda as President Kenyatta moves to complete some of his flagship projects.
For further economic recovery, the Kippra report also recommended the continued strengthening of the health system with more budget allocation to ensure enough equipment and medical personnel to contain the pandemic.
Prudent domestic revenue mobilisation through taxation is also key to recovery.
“There is need to reduce inefficient and non-productive tax expenditures for more revenue collections,” the report said.
“In addition, the use of technology will also be important in enhancing the efficiency of domestic revenue mobilisation for more collections.”
On manufacturing, which was adversely affected by the pandemic and contracted by 0.1 per cent in 2020, Kippra called for policies that boost demand for local products.
The policies should enhance capacities through opportunities afforded by the pandemic, such as production of hospital beds and ventilators, masks, disinfectants, personal protective equipment, and medicines while preparing for transition as the pandemic subsides.
To boost agriculture, Kippra called for more funding to research institutes, promotion of private sector involvement and strengthening of farmer groups and expansion of small-scale irrigation schemes.
Tourism was also heavily hit by the pandemic with revenue from the sector falling 73.6 per cent in 2020. To help the sector recover, Kippra said the government should increase funding for marketing in specific source markets and support of domestic tourism.
The report also urged for policy measures on economic diversification to build resilience and lessen the effects of shocks on real gross domestic product growth.
"This can be achieved by diversifying the narrow range of exports and value addition of the traditional exports,” it said.
Kippra also wants domestic debt restructuring policies to mitigate risks that come with the crowding-out effect.
The lowering of diaspora remittance fees could stimulate more inflows to support domestic consumption and savings, the report said.