On Saturday, President Uhuru Kenyatta unveiled a Sh53.7 billion Eight-Point Economic Stimulus Programme to cushion families and companies as we navigate our way out the Covid-19 pandemic.

In the economics of a lockdown, each shilling spent is likely to have a stimulating impact. It is from this understanding that governments are playing the central role in trying to stabilise their economies, just like in wartime, through economic stimulus packages.

Let us start by asking the question: is Sh53.7 billion sufficient to mitigate the Covid-19 impact?

African countries are estimated to lose more than half of their GDP growth to the Covid-19 impact — they were expected to have four per cent GDP growth in 2020.

So if they are losing this much, it means government stimulus packages should be around two per cent of GDP.

Namibia’s plan was at 4.25 per cent of GDP, Egypt at 1.8 per cent, Ethiopia’s at 1.6 per cent (but to be implemented in three months), while South Africa has the biggest at 10 per cent, but only half will actually be spent, which brings it to 4.5 per cent.

For Kenya, a two per cent of GDP stimulus programme is around Sh200 billion. The Sh53.7 billion unveiled by the President is 0.5 per cent of GDP, so the plan is underwhelming. Let us now delve into the elements of the eight-point programme.

LOSS OF INCOME

The biggest shock to the economy has been income shock as people lose salaries and businesses shut down.