Effect of Public Debt Portfolio on Economic Growth in Kenya

H.K. Isabwa¹

Section:Research Paper, Product Type: Journal-Paper
Vol.8 , Issue.9 , pp.6-12, Sep-2022

Online published on Sep 30, 2022

Copyright © H.K. Isabwa . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
Public debt plays a critical role in any country`s financial system. Public debt is used to finance both huge infrastructure development projects and it helps to bridge fiscal deficits of a country. In Kenya, high levels of external debt pose a great challenge on the economy because a large proportion of exports revenue is devoted to servicing these debts instead of being put into domestic investment thus it contributes to a reduction in the prospects of economic growth. The current study sought to determine the effect of public debt portfolio on economic growth in Kenya. The study adopted both a positivism research philosophy and an ex-post facto research design. The secondary data was for the period between 2014/15 and 2020/21. The data collected was analyzed using both descriptive and inferential statistics. STATA version 17.0 aided in data analysis. Regression results revealed that internal debt had a significant negative effect on Gross Domestic Product while external debt had also a significant negative effect on Gross Domestic Product. The study concluded that public debt portfolio has a significant effect on economic growth in Kenya. Both internal debt and external debt have a significant negative effect on Gross Domestic Product. The study recommended that there should be a separation of debt management and monetary policy objectives and accountabilities. Debt management, fiscal and monetary authorities should share information on the government`s current and future liquidity needs. The government should publish regularly information on the stock and composition of its debt and financial assets which include their currency, maturity, and interest rate structure.

Key-Words / Index Term :
Public Debt Portfolio, Economic Growth, GDP, Kenya

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