EFFECT OF EXTERNAL DEBT ON FOREIGN DIRECT INVESTMENT INFLOW IN KENYA
Abstract
Foreign Direct Investment serves as a crucial connection between developing and industrial nations. Kenya is constrained with drawing and maintaining Foreign Direct Investment (FDI) at optimal rates which can unlock the full potential of associated capital inflows and harness the benefits of global integration and technology transfer. Despite the widely acknowledged significance of FDI, the country struggles to cultivate an environment conducive to optimal FDI inflow. This deficiency not only hampers domestic investment opportunities but also significantly impedes the realisation of robust economic growth. The study's main objective was to assess the impact of external debt on foreign direct investment in Kenya for the period 2002-2021. Descriptive, correlation and causal research designs were adopted using yearly time series data. The results revealed that tax incentives (t=4.811738, p<0.05) and government recurrent expenditure (t=2.402518, p<0.05) had a positive significant effect on FDI Inflow while government external debt (t=-3154145, p<0.05) had a negative effect on FDI inflow in Kenya. To enhance the inflow of Foreign Direct Investment (FDI), the research suggested that policymakers should responsibly prioritize strategies to manage and reduce external debt burdens.
Keywords: Foreign Direct Investment Inflow, External Debt
CITATION: Makatiani, T., Ngala, C., & Mungai, A. (2024). Effect of external debt on foreign direct investment inflow in Kenya. The strategic Journal of Business & Change Management, 11 (3), 757 – 765. Http://dx.doi.Org/10.61426/Sjbcm.v11i3.3046
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i3.3046
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