ABSTRACT
Public debt in Kenya has consistently risen overtime, with larger portion being
debt from external sources. Both positive and negative effects of debt have been
experienced in Kenya since independence. In the last one decade external debt has
been rising sharply relative to economic growth of the country, which seems to be
stagnant overtime. Additionally, the country has been reporting several cases of
corruption and mismanagement of public revenue at different levels of public and
private sectors International Credit Rating Agency has ranked Kenya among the
most corrupt nations (143 out of 180) with a corruption perception index of 28
percent in 2017. Report from International Monetary Fund indicated that Kenya
has exceeded the generally accepted debt to Gross Domestic Product ratio of 50
percent as at February, 2018 by 6.2 percent. Additionally, the credit ratings of the
country has been downgraded from B1 to B2 credit rating, implying that the
country is rated highly speculative and that adverse financial or economic
conditions may render the country inadequate capacity to meet its financial
obligations. Therefore, this study examined the non-linear effect external debt on
economic growth and their channels in Kenya. The objectives of the study
included; first, assessing the non-linear effect of external debt on economic
growth. Secondly, was to examine the non-linear effect of external debt through
the channels influencing economic growth and lastly, to examine the effect of
corruption on external debt in Kenya. Secondary data for the period 1970 to 2017
was collected from Kenya National Bureau of Statistics, the National Treasury of
Kenya, Central Bank of Kenya, World Bank and International Monetary Funds
abstracts. In this context, Autoregressive Distributed Lag was used in estimating
the equations of the respective objectives after conducting the time series property
tests. The empirical results for the study revealed the non-linear effects of external
debt on Kenya’s economy. Additionally, the study established the a non-linear
relationship between external debt and economic growth through investment
channel by showing the existences of a positive effect on investment till a certain
threshold beyond which excess debt causes crowding out of investment. Also, the
study showed a positive effect of external debt on economy through Total Factor
Productivity channel and a negative effect through interest rate channel. Lastly,
the study showed the adverse effect of corruption on external debt in Kenya. The
study concluded that external debt results to a negative effect on the economy if
the government debt exceeds the debt threshold for the country.
HARON, K (2021). Non-Linear Effects Of External Debt And Their Channels On Economic Growth In Kenya. Afribary. Retrieved from https://afribary.com/works/non-linear-effects-of-external-debt-and-their-channels-on-economic-growth-in-kenya
HARON, KIPROTICH "Non-Linear Effects Of External Debt And Their Channels On Economic Growth In Kenya" Afribary. Afribary, 31 May. 2021, https://afribary.com/works/non-linear-effects-of-external-debt-and-their-channels-on-economic-growth-in-kenya. Accessed 07 Sep. 2024.
HARON, KIPROTICH . "Non-Linear Effects Of External Debt And Their Channels On Economic Growth In Kenya". Afribary, Afribary, 31 May. 2021. Web. 07 Sep. 2024. < https://afribary.com/works/non-linear-effects-of-external-debt-and-their-channels-on-economic-growth-in-kenya >.
HARON, KIPROTICH . "Non-Linear Effects Of External Debt And Their Channels On Economic Growth In Kenya" Afribary (2021). Accessed September 07, 2024. https://afribary.com/works/non-linear-effects-of-external-debt-and-their-channels-on-economic-growth-in-kenya