In a move that is aimed at cushioning the economy and the people of Kenya from the negative economic impact of COVID-19, the President of Kenya announced the following measures in a press briefing held in the evening of 25 March 2020:

Tax Measures

• 100% tax relief for persons earning a gross monthly income of up to KES. 24,000/=.
• Reduction of Pay As You Earn (PAYE) on individual income from the current 30% to 25%.
• Reduction of Corporate tax from the current 30% to 25%.
• Reduction of Turn Over Tax (TOT) from the current 3% to 1% for all Micro, Small and Medium Enterprises (MSMEs).

Whilst the effective date for the above measures was not stipulated, it is likely that they will commence from 1 April 2020 as is the case for the VAT tax measure stated below.

• Reduction of VAT from the current 6% to 14% effective 1 April 2020.

CBK Measures

The President reiterated the following measures already undertaken by CBK:

• Lowering of Central Bank of Kenya Mean Rate from the current 8.25% to 7.25%; and
• Lowering of the Cash Reserve Ratio (CRR) from the current 5.25% to 4.25% to provide additional liquidity of 35 Billion to also cushion non-performing loans

In addition, the following new CBK measure was introduced:

• CBK to provide flexibility to banks in respect of loan classifications so that loans that were performing as at 2 March 2020 are not classified as non-performing or if loans are restructured as a result of COVID-19, then they do not fall into non-performing loans.

Credit Reference Bureau (the “CRB”)

The President announced the suspension temporarily of listing of non-performing loan accounts with the CRB effective from 1 April 2020.

Other Measures taken to Increase Liquidity

• All ministries should cause payment of verified pending bills in the sum of KES. 13 Billion within three (3) weeks so that pending creditors are paid by the Government.
• KRA to refund VAT claims or offset withholding VAT in the sum of KES. 10 Billion within three (3) weeks to increase cash flows for businesses.
• Voluntary reduction of salaries by Government officials as follows:
  • The President and Vice President – 80% reduction;
  • Cabinet Secretaries – 30% reduction; and
  • Principal secretaries – 20% reduction

Other Measures taken by the President

• KES. 10 billion to be released for purposes of payment to the elderly, orphans and vulnerable people to cushion the effect of the pandemic to these groups.
• KES. 1 billion from universal health fund to be directed strictly at the recruitment of health workers who will assist with the pandemic.
• State and public officials of Job Group S with pre-existing conditions or the aged are to either take leave or work from home effective immediately. This excludes the security personnel and person working in essential services.
• Organise calendar of the Cabinet and committees to foster enhanced responses on the Pandemic. The weekly meetings chaired by the Cabinet Secretary for the Ministry of Interior and Coordination of National Security will now take place twice a week with a focus on the impact of COVID-19.
• Management of Ferry Services to be moved from the Kenya Ferry Services and to be vested in the National Police Service, the National Government and the Kenya Navy to ensure that persons using the Ferry follow proper procedures. In an effort to maintain social distance on board the ferries, the Ministry of Transport earlier today directed that the ferries would not carry pedestrian traffic. Anyone wishing to use the ferry must do so by use of a vehicle.
• Curfew to be imposed from 27 March 2020 from 7 p.m. to 5.00 a.m. except for persons within medical and critical essential services. You can access the full list of critical and essential service providers here.

As President Kenyatta pointed out, social distancing must be our new norm until we conquer the pandemic.

For any queries, please contact: Adil Khawaja and Richard Omwela.