Effect of Foreign Debt on Literacy Rate in Kenya
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Date
2024
Authors
Wafula, Gideon Makhanu
Njaramba, Stephen Githae
Journal Title
Journal ISSN
Volume Title
Publisher
EJEFR
Abstract
This paper investigated the effect of foreign debt on the literacy rate in Kenya. In the fiscal
year 2021/2022, public debt as a percentage of gross domestic product was 67 per cent,
which was higher than the debt ceiling of 55 per cent of gross domestic product. External
debt accounted for 52% of this total debt as of 2022, exhibiting a consistent increase since
2013, surpassing domestic debt. The burden of servicing foreign debt may subsequently
pose a challenge to the government in fulfilling its commitments in the education sector.
Consequently, lower literacy rates impede a nation's socio-economic progress as literacy
is critical for promoting peace and adopting new technologies, both of which drive
development. This study used the primary school completion rate as a proxy for literacy.
Secondary data published in international and national organizations from 1990 to 2021
was employed for analysis. The study’s theoretical framework was pegged on a
consumer utility maximization of a merit-good education 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 hurt the
literacy rate in the long run and had a positive effect in the short run. The study
recommends prudent management of foreign debt, so that it can facilitate improvements
in the education sector.
Description
Article
Keywords
foreign debt, literacy rate, ARDL Model, utility maximization
Citation
Wafula, G. M., & Njaramba, S. G. (2024). EFFECT OF FOREIGN DEBT ON LITERACY RATE IN KENYA. European Journal of Economic and Financial Research, 8(3).