The Effect of Foreign Debt and Taxation on Government Expenditure in Kenya

Cases of high levels of public debt have mostly been reported in many developing countries part of which is debt borrowed abroad. Foreign debt is more preferable by many developing countries because it is cheaper to service in terms of interest costs. These countries tax their citizens heavily to raise enough finances to pay foreign debt. It was thus feasible to establish the influence of the foreign debt and taxation on expenditure of the Kenyan government. The study employed a causal research design. The period under study ranged from 2002 to 2017. The study used secondary data which was extracted from the National Bureau of Statistics, and National Economic Surveys which were available at the Government of Kenya website. Correlation statistics were conducted to establish the association between variables. Regression analysis was used to establish the effect of foreign debt and taxation on government expenditure in Kenya. The findings revealed that foreign debt and taxation influences government expenditure individually. However, on the test of the joint effect, only taxation was found to influence public expenditure significantly unlike foreign debts.