Question

.The government of Kenya through the Minister of Finance presented the 2020 Budget statement to Parliament in November 2019.The Coronavirus Disease 2019 (COVID -19) pandemic that has hit the world has impacted on global economy including Kenya, thus affecting our macroeconomic targets in the budget statement presented in November 2019. The Minister of Finance presented a statement to Parliament on the economic impact of COVID – 19 pandemic on the economy of Kenya and the way forward at the end of March, 2020.

Discuss five (5) key impact of the COVID-19 on the achievement of our fiscal policy targets for the year 2020 by comparing the original budget statement to the one presented after COVID- 19.  

Answer 1

Five Key Impacts on the fiscal policy targets for year 2020 with regards to original budget for Kenya are as followed :

1. A significant reduction in the spending by the government in different sectors because of huge shortfall of $658m in revenue for the fiscal year.

2. Government granted KES 10bn cash to people of the country affected by this sudden pandemic which has impacted the liquidity budget of the government as announced originally.

3. CRR(Cash Reserve Ratio) has been reduced to 4.25% from the original 5.25% as presented in the original budget.

4. Provisioning requirements have taken a big leap for the banks of the country as the performing assets (loans) needs flexibile extensions.

5. Tenor of repurchase agreements were increased by the government from existing 28 days to 91 days.

6. Kenya is expected to see slow growth and GDP expansion in 2020 but still the impact of Covid on the economy of kenya will be less as compared to whole world because it is a resilient country.