Effects of Kenya’s External Debt on Poverty
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Date
2016-05
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Daystar University School of Business and Economics
Abstract
The purpose of this study was to investigate the effects of Kenya’s external debt on poverty. The objectives of the study involved establishing the association between external debt and poverty in Kenya, its long run effects and the channels through which debt affected poverty. The research was anchored mainly on the debt overhang hypothesis where debt service payments reduces funds for investments and government’s social spending especially on education and health. The study used the correlation research design to investigate the relationship between external debt and poverty. The population consisted of a 50 year period (1965-2015) of which the Government of Kenya has been borrowing externally. The study adopted a 15 year period sample size (2000-2014), arrived at using the purposive sampling technique. Secondary data used in the study was extracted from the World Bank and Central Bank of Kenya specifically on world development indicators and debt statistics. Data for debt and poverty variables were analyzed by running multivariate regression in Stata, while data presentation involved charting scatter plots on excel to show the changes in the variables through the years 2000-2014. From the analysis, the correlation between external debt and poverty in Kenya was found to be positive, that is, when debt levels increased, the level of poverty also increased both in the long and short run. The researcher regressed public education spending and access to health care as a key channels through which debt that can influence poverty. The findings concluded that public education spending was not statistically significant as an impact channel, showing that external debt did not significantly impact poverty through human capital. Regression results on health care showed a statistically significant result indicating that access to health was an impact channel through which debt affected poverty. The study recommended that the government of Kenya should concentrate more of its efforts to
lower its levels of external debt as there currently exists a debt overhang.
Description
Master Of Business Administration
In Finance
Keywords
Kenya’s External Debt on Poverty
Citation
Omingo. U. L. (2016). Effects of Kenya’s External Debt on Poverty. Daystar University School of Business and Economics