The Impact of Public Domestic Borrowing on Private Sector Investments in Kenya
Keywords:
Public debt, Domestic debt, Public domestic debt, Private investmentAbstract
In recent there has been rapid increase in uptake of domestic debt by the government of Kenya. The purpose of this study was to establish the Impact of Public Domestic Debt on Private Investments in Kenya. The independent variable was public domestic debt while the dependent variable was private investment. Secondary data on Public domestic debt data and private investment was collected from Central Bank of Kenya. The secondary data was for the periods 1999 to 2021. Private investment was operationalised using Gross fixed capital formation (GFCF) and the study applied Autoregressive distributed lag (ARDL) econometric model. The study found out that the long-term analysis indicated sustained public domestic borrowing had a negative influence on GFCF, revealing a crowding-out effect. This implied that over time, persistent government debt led to reduced private sector investment.
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