Covid-19: Ailing economy forces Uhuru’s hand in re-opening country


Covid-19: Ailing economy forces Uhuru’s hand in re-opening country
President Uhuru Kenyatta addressing the Nation at Harambee House on Monday, July 6, 2020. PHOTO| CITIZEN DIGITAL

In Summary

  • While the health situation dictated the outcome of the last review on June 6, the prevailing economic environment took precedence Monday as President Kenyatta announced a phased reopening of the country against a rising number of Covid-19 cases.
  • Thousands of Kenyans are for instance without livelihoods with employers instilling cost rationalisation exercises including layoffs, deep pay cuts and unpaid leaves.
  • However, according to the experts, the ease to restriction measures will not mark a return to the normal with the economic damage being a tough fix.
 

Caught between a rock and a hard place in reviewing existing COVID-19 mitigation measures, President Uhuru Kenya inclined on easing the pressure placed upon an ailing economy.

This is as he opted to ease part of restriction measures including the cessation of movement in and out of the Nairobi Metropolitan area, Mombasa and Mandera.

While the health situation dictated the outcome of the last review on June 6, the prevailing economic environment took precedence Monday as President Kenyatta announced a phased reopening of the country against a rising number of COVID-19 cases.

Moreover, the phased re-opening was in spite of Kenya failing to meet its own prescribed minimum thresholds to warrant the lessening of mitigation measures.

Speaking on June 6, President Kenyatta retained orders on the cessation of movement including a ban on local and international flights as the curve of infections remained on the rise against limited hospital capacities and contact tracing capabilities.

However, President Uhuru Kenyatta made a compromise on Monday as he eased measures against a shortfall in meeting the bare minimum.

“The leadership of all the critical stakeholders we have consulted on this path for the last month is standing behind me today. And the question before us is the following: Have we met this irreducible minimum? Are we ready to re-open?” President Kenyatta posed in a televised address to the nation.

“According to the experts and stakeholders, we have not met the irreducible minimum percent. However, consensus amongst them is that we have reached a reasonable level of preparedness across the country to allow us to re-open.”

Economic nightmare

The ongoing economic nightmare is largely attributable to the change of heart by the President with output having descended into historical lows over the last four months.

Thousands of Kenyans are for instance without livelihoods with employers instilling cost rationalisation exercises including layoffs, deep pay cuts and unpaid leaves.

Meanwhile, hundreds of firms especially small and medium enterprises (SMEs) have folded under painful cash constrains to leave behind a trail of widespread economic devastation.

According to the first quarter GDP print by the Kenya National Bureau of Statistics (KNBS), economic growth contracted to 4.9 percent from 5.5 percent in the quarter ending December, the lowest print in over two years since September 2017.

KNBS quarterly labour data to March meanwhile revealed the loss of 287,481 jobs in three months preceding the deepening of the pandemic.

The two prints however barely scratch the surface of the devastation which was more profound in the second quarter running to June.

The easing of part of containment measures is now expected to lift commerce in the country with end of the cessation of movement in the counties of Mandera, Mombasa and Mandera for instance expected to provide vigour to the transport sector.

“The ease on the cessation of movement and the return to domestic flights is an indicator of a government seeking to boost the economy,” said Genghis Capital Head of Research Churchill Ogutu.

Sterling Capital Head of Research Renaldo D’Souza meanwhile says the government also faces pressures to raise revenues to fund public spending.

“The increase in economic activity will be to the benefit of government. We have a government battling to raise revenues,” he said.

Scepticism

However, according to the experts, the ease to restriction measures will not mark a return to the normal.

Churchill Ogutu for instance warns of loose ends to the rephrased re-opening which passes the buck of responsibility to contain the virus to individuals.

He further expects commercial activity to remain on a weaker footing.

“With the buck of responsible passed on to individuals to contain the spread, cases may explode and it is likely the country will be returning to the tight restrictions,” he added.

“Those who have lost their jobs in recent months may not get them back right away. I still hold a negative outlook on growth as recovery would still take time as the environment remains volatile.”

Renaldo D’Souza shares similar sentiments as he further expects part of Kenyans to maintain caution in their conduct of daily routines.

“We still won’t be operating at 100 percent capacity. Some individuals will still be working from home while others will still choose not to travel,” he said.

On Monday, Treasury Cabinet Secretary Ukur Yatani firmly held up his annual growth estimates at no less than 2.5 percent as the easing of restrictions return to economy on the growth trail.

Other parties have however retained pessimism for the country’s growth as uncertainties remain over the containment of the pandemic.

Last week, the International Monetary Fund (IMF) revised its growth outlook for Kenya to a negative 0.3 percent from one percent in April as it predicted the country’s first ever recession in 28 years since 1992.

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Story By Kepha Muiruri
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