Tough times for needy people as coronavirus funds dry up

The clock is ticking on the Covid-19 reliefs introduced in March to cushion Kenyans from the economic effects of the pandemic.

As funds dry up and the virus caseload rises, the government has started scaling down some of the reliefs.

The first to be knocked off is the cash transfer programme for poor households, which will end six months of social safeguards to the vulnerable. The government sends about Sh1.3 billion every month in the scheme.

But the payments will now be terminated in the first week of October, according to a plan revealed by Labour and Social Protection Cabinet Secretary Simon Chelugui in Parliament last week.

Since May, 341,958 households have received the weekly Sh1,000 stipends to cushion them from the dire economic conditions caused by the pandemic.

Mr Chelugui told legislators that the initial Sh10 billion allotted for the cash transfer scheme was disbursed by the Interior ministry via M-Pesa.

The CS said the weekly cash transfer programme aimed to reach 669,000 households in all the 290 constituencies across the 47 counties.

Mobile reliefs

Meanwhile, it is the Central Bank of Kenya (CBK) that is standing between consumers and mobile operators in their quest to resume charging transactions below Sh1,000.

The CBK unilaterally extended the mobile reliefs for another six months to the chagrin of mobile operators. The decision has given consumers until the end of the year to enjoy free transactions for Sh1,000 and below as well as free bank transactions.

The banking sector regulator said a significant increase in the use of mobile money channels by individuals in both value and number of transactions was noted after service providers removed the transaction charges.

"Most of the increase was in low-value transactions of Sh1,000 or less—this band accounts for over 80 per cent of mobile money transactions and charges were eliminated, which has helped cushion the most vulnerable households," CBK said.

"Moreover, more than 1.6 million additional customers are now using mobile money channels. However, business-related transactions have declined marginally," it said, adding that CBK notes that these measures were timely and highly effective in facilitating official and personal transfers at a time of great need.

"Further, CBK assesses that the increased wallet and transaction limits that were also announced have led to increased usage at higher amounts and greater convenience," CBK said.

These measures will remain in place until December 31, 2020, giving consumers another four months of reliefs.

But Safaricom opposed the extension for another six months, saying the regulator did not consult it in making the decision that will cost it Sh19 billion in lost revenues by the end of the year.

"We estimate the impact on M-Pesa payment support will increase to about Sh19 billion by the end of the year. Our appeal to the government would be that the regulatory environment that will follow this period of the pandemic be designed to support the revival of businesses and a return to growth," Outgoing Safaricom Chairman Nicholas Ng'ang'a said in a virtual annual general meeting.

On taxes, Treasury CS Ukur Yatani indicated that the reliefs announced in March would last till the end of the pandemic. The government reduced the Personal Income Tax rate (PAYE) from 30 per cent to 25per cent. It also gave a 100 per cent tax relief for persons earning up to Sh24,000 per month.

It also reduced the rate of resident corporate Income Tax from 30 per cent to 25 per cent and moved back on the controversial turnover tax for small businesses from the initial three per cent to one per cent.

 The other relief is on Value Added Tax, which was reduced from 16 per cent to 14 per cent.

Distressed borrowers

Further, the government suspended listing for all persons, including companies, at Credit Reference Bureau for any defaults on loans during the Covid-19 season.

For its part, the CBK lowered the Cash Reserve Ratio to 4.2 per cent, a decision that released Sh35.2 billion additional liquidity to commercial banks to support distressed borrowers. The regulator also offered flexibility to banks on loans that were active as of March 2020 to maintain liquidity levels.

The Treasury also released Sh10 billion for VAT refunds, while the taxman has urged citizens to play their part as they enjoy the reliefs. "As the country faces this global health challenge, all citizens are called upon to play their part. Therefore, we are encouraging all taxpayers to continue paying all taxes due to support the government in provision of critical services," the Kenya Revenue Authority (KRA) said in an earlier statement.

KRA said taxpayers are required to determine correctly their tax liability and remit the same in a timely manner. "KRA will decisively handle any matter that pertains to deliberate non-payment of taxes. In the event that a taxpayer is not able to honour the agreed payment plan, it's mandatory that the same is reviewed and agreed with our debt team," KRA warned.

Then there is the Sh10 billion National Hygiene Programme also known as the Kazi Mtaani initiative, which has been characterised by delays in payments.

The programme hopes to clean up urban spaces as well as give young people gainful employment. President Uhuru Kenyatta launched the plan in May and hopes to hire 200,000 young people across the country through an initial investment of Sh10 billion. Without extra funding, this plan is set for a natural death.

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