Effect of External Debt on Performance of the Agricultural Sector in Kenya

Abstract

Agriculture forms the backbone of the economy in most developing and developed countries. Its production has increased significantly over the last three to four decades. In 2018, it contributed to about 4% of global gross domestic product (GDP), and in 2020, it accounted for 35 percent of the gross domestic product (GDP) and 65 percent of foreign exchange earnings in Kenya. It’s also a primary source of raw materials for both national and international industries. However, its performance has been declining over the years, and there is a dearth of information with regard to how external debt has affected the sector’s performance. Thus, this study sought to investigate the effect of external debt on the performance of the agricultural sector in Kenya. A correlational research design was adopted. The time series data used in the study was obtained from the databases of World Development Indicators and Statista, covering the period from 2012 to 2020. The data was analyzed using EViews software. The findings revealed that external debt had a significant positive effect on the performance of the agricultural sector in Kenya. Therefore, according to the study, the government of Kenya needs to invest more external debt in agriculture to spur agricultural sector growth.