Effect of public debt and budget deficit on Kenya's economic growth

The study shows a positive long-run causality between public debt and real GDP growth, suggesting that Kenya's debt has been sustainable and supportive of growth.

Kenya uses internal and external debts to finance its budget deficit, which arises when national needs for an increasing population exceed available resources.

The research is framed by Keynesian theory, Ricardian equivalence theory, and neoclassical theory.

According to findings using the vector error correction model, the relationship between primary budget balance and public debt is positive and statistically significant, indicating sustainability.

If investment programs financed by debt do not yield sufficient returns, the country may face economic losses despite initial growth.