Macro-Economic Effects of COVID-19 on the EAC Economies

There is no doubt that COVID-19 induced headwinds have rattled the EAC Partner States, the effects of which are: sluggish economic growth; weak private sector credit growth in spite of record low lending rates; weakened external sector and weakened financial sector profitability and return on assets albeit total risk weighted assets; and Non-Performing Loans and liquidity ratios being above the regulatory requirements, implying a resilient financial sector. Consequently, the EAC Partner States adopted expansionary fiscal and monetary policy in combination with COVID-19 containment measures in an effort to abate the distortionary effects of the virus. As such, this study sought to undertake an exploratory study of the policy choices across the EAC Partner States in an attempt to identify areas of policy convergence. Evidently, across all the EAC partner states, both fiscal and monetary policy regimes were expansionary. However, a micro examination of the policy paths shows that both fiscal and monetary policy was more intensive and extensive in Kenya, Rwanda, and Uganda in comparison to Tanzania, South Sudan, and Burundi; which was partly accounted for by the less than stringent COVID-19 containment measures adopted in Burundi and Tanzania unlike Uganda, Rwanda, and Kenya. Particularly in Rwanda and Uganda, the nationwide lockdowns implied that both fiscal and monetary policies had to be deep cutting and wide enough to accommodate the COVID-19 induced economy-wide shutdowns.