The Effect of Public Debt Composition and Government Expenditure on Economic Growth of Kenyan Government

Many developing countries have high levels of public debt many of which do not have sufficient resources to meet the public debt obligations. The Kenya government has reported high debt levels the debt levels of which do not assume a downward trend but instead continue escalating from one year to another while not downplaying the role of the its huge expenditure. The major concern is whether some developing countries such as the Kenya government should raise more of foreign debt which is cheaper in terms of interest costs while adhering to the conditionality of lending countries or whether the country should borrow domestically despite the higher interest costs. It was thus feasible to establish the influence of the composition of the Kenya public debt and government expenditure on the country’s economic growth. The study employed a causal research design. The period under study ranged from 2002 to 2017. The study used secondary data which was extracted from the National Bureau of Statistics, and National Economic Surveys which were available at the Government of Kenya website. Descriptive statistics was used to test the magnitude of the study variables. Regression analysis was used to establish the effect of public debt composition and government expenditure on economic growth in Kenya. The study established that both public debt composition and government expenditure had significant effect on economic growth of the country when tested individually. However, the findings further revealed that on the combined effect of the two independent variables, only government expenditure was found to influence economic growth unlike domestic public debt. The study therefore recommended that the government of Kenya should take precautions when engaging borrowing domestically and by extension in any form of borrowing.