| dc.description.abstract | This paper analyses the relationship between debt servicing and economic growth in Kenya for the period 1970 - 2008, focusing on both Internal and External debt service. Results of the study show that economic growth is not very much affected by external debt servicing. Instead, it was found that labour force has a strong relationship with economic growth. In debt overhang theory, it is anticipated that debt servicing will decrease economic growth because investors will be discouraged to invest. However, debt servicing did not show any effect on economic growth. This is because. debt servicing in Kenya is not high enough for debt overhang to occur. Therefore, debt servicing is not yet a threat to economic growth in Kenya.
The higher the rate of interest on debt, the greater would be the rates of expansion of exports have to be to ensure the capability to service the debt. The decline in investment and growth performance of the highly indebted countries in the past three decades is frequently attributed, at least to some extent, to the burden of their foreign debt, a phenomenon which has been recognised as debt overhang. | en_US |
