Regression Analysis of the Effects of Debt onEconomic Performance in Kenya

Abstract

This study investigates the impact of debt on economic performance in Kenya, focusing on both internal and external debt. Using regression analysis and correlation techniques, data from 2000 to 2021 was analyzed to understand the relationship between debt levels and economic growth indicators such as GDP. The findings reveal a nuanced relationship: while internal debt shows a positive association with economic growth, external debt demonstrates a negative association. Effective debt management strategies are crucial to mitigate adverse effects, including monitoring debt levels, negotiating favorable terms with creditors, and directing borrowing towards productive sectors. Promoting export-led growth, enhancing fiscal discipline, and continuous monitoring and evaluation are recommended policy actions. Despite limitations such as data constraints and external factors influencing economic performance, future research avenues include long-term analysis, sectoral studies, comparative analyses, and qualitative investigations into stakeholder perceptions. This study contributes to understanding the complexities of debt dynamics and informs policymakers in navigating sustainable economic development pathways.