Impact of China‟s Monetary Aid on Kenya‟s Public Debt Stock

Abstract

t: The purpose of the study was to examine the impact of China’s Monetary Aid on Public Debt. The key literature reviewed from various sources showed that a number of China’s monetary aid in form of concessional loans, grants and interest free loans had great impact on the public debt many SubSaharan African countries, Kenya being the classic example under study. Realism theory was used to theoretically analyse the study in the behaviour of China’s aid to Kenya as largely selfseeking. The study adopted an exploratory research design. The target population was limited to two Kenyan government ministries, IR scholars and economic experts and the embassy of the Peoples’ Republic of China in Kenya, the total population under study was 700. This study applied purposive sampling technique in selecting a sample size of 70 respondents. Documents, questionnaires and interviews were used to collect data. The study found that monetary aid from China as concessional loans, grants and interest free loans have direct positive impact on the Kenya's public debt to a large extent when measuring it through the real GDP growth. The study findings established that China’s aid in form of concessional loans do not only come with a tag of ‘zero-or-no interest loans but also are attractive for their non-conditionality to the recipient countries hence preferred to those others from OECD-DAC which have constant regulations. The study recommended that the government of Kenya to reduce its external borrowing and embrace savings, external debts require consistence debt servicing unlike debts from domestic borrowing. The study further recommended that Kenya should reconsider its competitive advantage in manufacturing, sisal, tea, leather and coffee exports to the Chinese mainstream economy so as to meet the aspect of fair and balance of trade. An area for further study would be on the Debt-Trap Diplomacy claims associated with China aid policies to Sub-Saharan African countries.