Browsing by Author "Wafula, Gideon Makhanu"

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    Effect of Foreign Debt on Human Development in Kenya
    (Kenyatta University, 2024-05) Wafula, Gideon Makhanu
    Human development places emphasis on an individual’s wellbeing using the Human Development Index indicators; education, health and income. Public debt is acquired to enhance investments in areas that promote social welfare of an economy’s citizens. Foreign debt is intended to bridge the gap between domestic savings and investments. The successful utilization of these debts is measured by improved wellbeing of the citizens using human development index. There has been a negative trend in human development indicators in Kenya in the recent past at a time when external debt is rising. In the fiscal year 2021/2022 public debt as a percentage of gross domestic product was recorded at 67 percent which was higher that the debt ceiling at 55 percent of gross domestic product. External debt accounted for 52% of this total debt as at 2022 recording a continuous increase as from 2013, surpassing domestic debt. As the public debt was bursting its ceiling, the human development indicators were showing a declining trend, which begged the question on the effect of foreign debt on human development. The study determined the effect of foreign debt on Human Development Index proxies namely; literacy rate, health and poverty. The study used secondary data published by various regional and international organizations from 1990 to 2021.The study was pegged on a consumer utility maximization of a merit good (education and health) theoretical framework constrained by the government’s financing. The relevant time series and diagnostic tests were performed on the data series and models. Auto Regressive Distributed Lag model was used for estimation using ordinary least squares. The findings were that, foreign debt had a negative effect on human development in Kenya in the long run. However, in the short run, foreign debt had a positive influence on literacy rate and led to a decline in morbidity. The study recommends prudent management of foreign debt