Browsing by Author "Muhdhar, Nuru Abdurahman"

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    Foreign Capital Flows and Economic Growth in Kenya.
    (Kenyatta University, 2025-11) Muhdhar, Nuru Abdurahman
    Economic growth of any nation is key to that economic as it contributes significantly to the development and wellbeing of that economy. These major benefits are dependent on many factors including foreign capital flows that need to be addressed through the management of the country’s fiscal policies. Ideally, a country's economic development is anticipated to enhance living standards by providing education, healthcare access, infrastructure, housing, quality food supply, improved roads, and similar amenities. However, this is not always the case. Economic growth of Kenya has recently attracted attention due to widespread erratic volatility in its growth despite huge increase in foreign capital flows. Therefore, the resolve of this research is to ascertain the effect of foreign capital flows on economic expansion in Kenya. In particular, the research explored the effect of foreign direct investment, remittances, foreign portfolio investment and foreign debt on economic expansion of Kenya. The research was underpinned on the Keynesian theory, Wagner’s Law and Solow-Swan theory. The correlational explanatory research approach was used in the study. The target audience was Kenya as a country which is also the unit of analysis. Secondary data, was acquired with the aid of documentary guides and data sheets from World Bank, CBK and KNBS. Diagnostic tests (Auto correlation, multicollinearity, heteroscedasticity, normality, co-integration and unit root test) was carried out before data analysis. Multiple linear time series regression model was adopted. Descriptive statistics, including frequencies, mean, and standard deviation, along with inferential statistics such as Pearson correlation and regression analysis, was employed in data analysis and displayed in frequency distribution tables, charts, and graphs. The research suggested that foreign direct investment, remittances, foreign portfolio investment and foreign debt, when analyzed individually, each had a statistically significant bearing on the economic growth in Kenya with p-values of 0.047, 0.028, 0.046 and 0.000 respectively. As a result, these hypotheses were rejected at 5% significance level. The report recommended that Kenya government should seek to improve the investments climate and business environment in the country to attract mode FDI which can be able to have a significant role on economic growth. Having policies that encourage FDI and marketing the country as a desirable investment destination would be a good starting point. Equally, it recommends that the government should devised a foreign policy that places great importance on the diaspora. Additionally, this article advocates for the Kenyan government to implement a holistic strategy to promote foreign investment, acknowledging its crucial role in stimulating economic growth and development. Moreover, the government ought to execute various strategic efforts aimed at optimizing and clarifying the investment process. Ultimately, it recommends that the Kenyan government aims to decrease its budget deficit to GDP ratio to an average of 4 percent prior to 2030. The fiscal policy has inadequately addressed rising debt levels, thereby jeopardizing the Government's pursuit of fiscal debt sustainability. Consequently, the National Assembly ought to enact a fiscal law establishing a maximum threshold for the fiscal deficit to GDP ratio, which the National Treasury must not surpass at any time, aligning with the long-term debt strategy to prevent the public debt to GDP ratio from escalating uncontrollably.