Workers’ Unable to Send Relatives Cash as Covid-19’s Impact Bite

About eight in 10 workers are unable to send cash to their relatives in rural Kenya in the wake of the Covid-19 economic hardships, says a new survey. The survey reveals that the majority of households have not felt the impact of the reduction in VAT from 16 to 14 percent.

According to the poll released Sunday, 79 percent of Kenyan workers interviewed were not in a position to support their dependants financially.

The finding indicates deepening poverty levels, especially in rural areas, where households rely on cash remittances from relatives working or running businesses in towns and cities.

The impact of social distancing, night curfews and closure of businesses like bars and schools has impacted consumer spending as well as workers’ ability to meet their obligations.

More than half of the respondents interviewed between May 28 and June 2 said that their salaries have been reduced by companies struggling to remain afloat, making it difficult for them to meet basic expenditure needs like paying rent.

VAT Reduction

About 72 percent of the respondents said households had not seen a drop in product prices after the VAT drop on April 1. The cost of basic goods like detergents, cooking oil, electricity, airtime and services like pay-TV subscriptions dropped after the cut in consumption tax. However, the drop was not significant enough to register an impact on consumers.

The reduction in VAT was part of the raft of measures announced by President Uhuru Kenyatta in March to ease the pain on households facing lower incomes arising from the slowdown in the economy caused by the Coronavirus pandemic.

This was the first time in seven years that Kenya had reduced VAT after including more commodities under this tax category in 2013. Among the goods whose VAT was lowered are books, phones, electronics, computer hardware and software and newspapers. Raw foods are exempted from the tax

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