Title:
THE INFLUENCE OF PUBLIC DEBT ON ECONOMIC GROWTH IN KENYAN GOVERNMENT

Authors:
Dr. Angela Mucece Kithinji ,Kenya

Abstract:
Public borrowings is necessary since it aids in bridging the resource gap between receipts and expenditures of Government. It is one method of financing government operations, though not the only method as government can also create money to monetize its debts, thereby removing the need to pay interest. Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable as a prudent public debt management helps economic growth and stability through mobilizing resources with low borrowing cost and limiting financial risk exposure. However, the impact of public debt on economic growth of many nations remains a controversial issue in both academic and policy making systems. In addition, domestic interest payments consume a significant part of government revenue more so if the associated interest rates are higher compared to those on external debt. The current research sough to estimate the influence of public debt on economic growth in Kenyan Government. The study followed a longitudinal research design where secondary data was collected from available record for a period of sixteen years ranging from 2002 – 2017. Time-series analysis was employed in the study. Correlation results indicated that all the variables under study namely economic growth, public debt and inflation were found not to associate to each other significantly. Regression findings showed that the effect of public debt and economic growth was not significant. Even after controlling public debt with inflation, their relationship towards economic growth was still found to be insignificant. The study recommends that policies implemented to promote economic growth should be in tandem with policies to reduce public debt if an increase in economic growth has to be realized and in addition focus on reduction of inflation rate