Effect of Public Debt on Interest Rates in East African Community Countries

Abstract

Any country's economic progress is dependent on its public debt. Its usage is also critical for the country's economic development because it is the first payment made with all of the money accumulated over time. The goal of the study was to see how debt affected interest rates in the EAC. The goal of the study was to see how external debt and local debt affected interest rates. A descriptive research approach was used in this study, and secondary data on variables was acquired. A timeframe and amount of natural data were collected. Descriptive analysis was used to examine the data. The correlation analysis was used to analyse the association between the variables, while the regression analysis was used to identify the strength of the independent variable in comparison to the dependent variables. Debt Service, Home Debt, and External Debt were three unique independent factors that were postponed in relation to dependent variables: Interest rates are used to determine the length of your connection. Time series models were employed in the study to examine the influence of public debt and its subsequent service level on Kenya's Gross Domestic Product Growth. Budget deficit is crucial in deciding economic expansion, budget deficit has a significant but negative connection with a 5% risk premium and it has no effect on short-term wealth creation, and loan repayment has made a contribution to short-term population development, but the result is not significant, according to research. The finding was that, in the near run, public debt has minimal impact on the country's economic development. Financing from developing infrastructure, as outlined in Vision 2030, to ensure that the country achieves a middle-income economy, should be promoted, according to the report, and foreign debt should be managed properly (With infrastructure development and infrastructure development social and external debt levels controlled and limited).