Ways to Recover from Economic Crisis
Kenya’s budget for 2019–20 announced an emphasis on the Big Four sectors — Agriculture, Manufacturing, Construction, and Healthcare. The COVID-19 crisis puts Kenya’s ambition in every single one of those sectors at risk.
This is a truly global crisis as no country is spared. Countries reliant on tourism, travel, hospitality, and entertainment for their growth are experiencing particularly massive disruptions.
Kenya’s GDP is projected to shrink by 5% if the worst-case scenarios of the spread of COVID-19 are realized.
The government announced various strategies put in place in a bid to help the economy from sinking during these hard times. Among them included an addition of $100 million for cash transfers to vulnerable groups across the country, and income tax waiver for low-income earners (taxpayers in the lowest income segment, with monthly earnings of up to $240), a reduction of corporate income tax from 30% to 25%, and a clearance of $130 million worth of pending bills in a bid to improve liquidity. Notably, the measures will sink over $700 million in tax revenue as it works to save the already staggering economy.
This brings the question, how do we ensure a healthy and sustained economic and social recovery from our brewing economic crisis?
The elimination of legal barriers to entry into the entrepreneurship will go a long way in streamlining the allocation of productive factors; these include natural resources, labor, capital, and entrepreneurship.
Elimination of first and second category tax for small and medium-sized enterprises (SMEs) is vital. Eliminate value-added tax (VAT) from the basic basket, of inheritance, allowance, and donation taxes, of investment taxes, and housing taxes.
A country can take several years to recover from a crippling economic slowdown bringing the public expenditure to pressure. However, working to ensure a structural balance and preventing fiscal deficit and indebtedness can significantly reduce the effects.
Maintaining minimal expenditure is highly recommended. Reducing the spending of ministries, secretaries, and other state agencies is highly advised.
Kenya is the nerve-center of the region’s economy. Therefore the strategies it will use to fight the economic hardships will have a significant impact on the region.
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