Consider a stimulus package for Covid-19

The global coronavirus pandemic is taking a heavy toll on the economy and the situation is bound to worsen should infections spread further. There is anxiety all round, which is the reason the government needs decisive action to reassure the citizens not only of virus control, but also economic management.

Financial markets are tumbling as businesses take a beating. Big corporates such as Kenya Airways, one of the worst-hit as the aviation industry grinds to a halt, are instituting drastic measures, including pay cuts. The flower industry, which thrives on European markets, is collapsing with the ban of international flights.

For this reason, the public is keenly awaiting concrete plans from the government on how to deal with the crisis. Covid-19 is, foremost, a health challenge. But it is as much a financial, social and political challenge. Productivity has dipped and is likely to deteriorate further, resulting in huge economic losses.

So far, the Central Bank has announced a series of actions to insulate businesses and minimise damage. Among them, commercial banks have been asked to waive levies on various transactions. They have also been asked to renegotiate loans to extend the repayment period in order to give relief to borrowers.

But that barely scratches beyond the surface. Waivers on bank charges are modest and have a minimal impact. Precisely, the prevailing economic conditions call for robust actions.

Mass redundancies, especially in the aviation and hospitality sectors, are a major threat. With countries imposing travel bans, aviators are staring at colossal losses. Likewise, hotels, tour operators and others in the chain are hard hit with decreased visitors. Hotels are operating far below capacity, forcing staff cuts.

Other employers have had to scale down operations and ask most of the staff to work from home. But that does not cut on operational costs. Firms find themselves in that awkward situation of reduced productivity, lower revenues but constant overheads.

To this extent, therefore, there is a need for a stimulus package to ease the cost burden on firms and individuals. Specifically, the government should consider tax breaks, including waivers or staggering payments, to give a breather to, especially, small- and medium-sized firms to help them to survive this trying period.

In bigger economies like the United States, China and Europe, governments are offering huge stimulus packages, such as cash bailouts and tax breaks, to companies and disadvantaged individuals. But despite ours being a struggling economy, the government can nonetheless offer tax breaks, including restructuring and deferment of payments, to ease cash flow.