Find a way to revive depressed economy

Economic projections are getting dimmer by the day as the Covid-19 ravages.

Latest figures from the National Treasury show the country will miss Sh172 billion in revenues within three months as the government rolls out measures to cushion the citizens, especially the most vulnerable, from the devastations of coronavirus.

Yet this is inevitable because the government has to act in the interest of the citizens. It has responsibility to safeguard welfare of the citizens.

But the challenge is to find ways and means of dealing with the revenue shortfalls. The National Treasury has to find ways of steering the economy to withstand the turmoil.

In the past few weeks, the government has doled out package of reliefs, including tax waivers for low-salary earners and reduction of value added tax from 16 per cent to 14, as well as a five per cent drop of pay-as-you earn tax.

The coronavirus has affected the production and supply chain as companies and organisations close shop and employees forced to working from home.

The firms are feeling the burden because of shattered businesses. Most industries such as aviation, general transport, tourism and hospitality have shut down.

In some cases, employees have been forced to take pay cuts or unpaid leave because the firms are not operating. None of which is interesting.

Cumulatively, these have negative bearing on tax collections. When companies cease operations and unemployment increases, revenues remitted to KRA decline remarkably.

As consumption of goods and services diminishes, that affects revenue collection. Mr Yatani and his team have a tough job.

They have to think innovatively and act aggressively to plug in the deficit and stabilise the economy. One option is to seek debt rescheduling.

Notably, the country is weighed down by huge loans mainly secured for infrastructure development. Most of these are due. Statistics show the country spends Sh600 billion on loan repayment annually.

The government should seek debt renegotiations from the lenders. And the best way to do that is to work with other countries at the sub-regional or continental level to convince the lenders that as currently constituted, the debts are overwhelming and cannot be repaid as scheduled.

Related to that is negotiation for interest waivers to reduce total cash being paid back.

Second, the National Treasury has to intensify cost-cutting and push for budget reallocations. Luxuries such as travels, trainings and hospitality have to go.

Wastages and corrupt practices at national and county levels have to stop. Third, counties must cut expenditures and prioritise spending. Tough choices must be made.