The impact of external debt and external dept servicing on social service spending in Kenya
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Date
2020
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Dar es Salaam
Abstract
Mounting levels of external debt led to increased interest rate payments that may required the shifting of resources from one budget share in favour of debt repayment. This has an effect on the current and future welfare of the citizens of a country. This study assessed the impact of external debt and external dept servicing on social services (health and education) spending in Kenya for the period between 1980-2017. The study used the ARDL Bounds Testing Approach to determine the existence of a long run relationship and later estimated the Autoregressive Distributed Lag model. External debt and external debt service were found to reduce total expenditure on education and health while Gross Domestic Product per capita and inflation were found to reduce health and education spending. Dollar exchange rate was found to have a positive effect on social service spending. The study then disaggregated expenditure on health and education into recurrent and development expenditures with the intention of assessing the magnitude and direction of the dept burden of the disaggregated components. Results from recurrent spending in education and health were similar to those obtained from total spending in education and health. However, it was found that external debt service had a more devastating effect on development social service spending than on recurrent and total expenditure on health and education. External debt was found to have a positive impact on development6 spending on education and health. Depreciation of the Kenyan shilling was found to reduce development social service expenditure while Gross Domestic Product per capita was found to positively influence development social service spending. The study drew some policy implications with regard to the external debt burden. One of them is that the government needs to strike a balance between borrowing vis-a-viz debt service spending. With regard to the exchange rate, external debt should not be dollar denominated but should be acquired in a mixture of currencies to reduce the risk of a single currency denominated external debt.
Description
Available in print form, East Africana Collection, Dr.Wilbert Chagula Library, (THS EAF HG3891.5.K4084)
Keywords
Debt external, Social service, Kenya
Citation
Owino, F. O (2020) The impact of external debt and external dept servicing on social service spending in Kenya, Masters dissertation, University of Dar es Salaam, Dar es Salaam.