Does External Public Debt Affect Health Status in Kenya? Evidence from Time Series Data
DOI:
https://doi.org/10.70641/ajbds.v2i1.157Keywords:
Health Status, Health Economics, External Debt, MorbidityAbstract
Kenya’s health system continues to face persistent budget deficits due to increasing demand for medical services. Consequently, the government has been compelled to seek alternative sources of finances, leading to a bulging national debt burden. In the 2021/2022 fiscal year, public debt reached 67 percent of GDP, surpassing the 55 percent debt ceiling, with external debt accounting for 52 percent of the total debt stock in 2022. This paper investigates the effect of external public debt on health status in Kenya. Morbidity rates are used as a proxy for health burden. The study used annual time series secondary data from national and international sources spanning 2001 to 2021. The study’s theoretical framework was based on the consumer utility maximization model of a merit good morbidity (health burden) constrained by government funding. Time series and diagnostic tests were done on the dataset, and an Auto-Regressive Distributed Lag model was estimated using ordinary least squares. The findings were statistical significant that rising foreign debt negatively affects health outcomes in Kenya. A one percentage point increase in external debt relative to GDP was associated with a 0.5512 and 0.3048 percentage point rise in morbidity (health burden) in the long run and short run respectively. The study recommends prudent management of external debt while safeguarding health sector allocations to ensure preparedness for unforeseen emergencies such as the Covid-19 pandemic.
References
Aladejare, S. A. (2023). Does External Debt Promote Human Longevity in Developing Countries? Evidence from West African Countries. Fudan Journal of the Humanities and Social Sciences, 16(2), 213–237. https://doi.org/10.1007/s40647-023-00365-1
Alkire, S. (2002). Valuing Freedoms: Sen’s Capability Approach and Poverty Reduction (1st edn). Oxford University PressOxford. https://doi.org/10.1093/0199245797.001.0001
Annual Public Debt Management Report for financial year 2021/2022. (2022). Republic of Kenya, National Treasury and Economic Planning, Public Debt Management Office. Government of Kenya. https://treasury.go.ke/wp-content/uploads/2022/12/ANNUAL-PUBLIC-DEBT-MANAGEMENT-REPORT-2-12-2022.pdf?utm_source=chatgpt.com
Arrow, K., J. (1963). Uncertainty and the Welfare Economics of Medical Care. The American Economic Review, 53(5), 941-973 (33 pages).
Berkowitz, S. A. (2024). Health Keynesianism: Why Full Employment Policy Matters for Population Health. Journal of General Internal Medicine, 39(10), 1914–1916. ://doi.org/10.1007/s11606-024-08756-0
Besley, T. (1988). A simple model for merit good arguments. Journal of Public Economics, 35(3), 371–383. https://doi.org/10.1016/0047-2727(88)90038-2
Bosi, S., Camacho, C., & Desmarchelier, D. (2023). Human capital and welfare. Oxford Economic Papers, 75(2), 307–324. https://doi.org/10.1093/oep/gpac020
Chakraborty, B., & Gupta, M. R. (2006). A Note on the Inclusion of Human Capital in the Lucas Model. International Journal of Business and Economics, Vol. 5(No. 3), 211– 224.
Coccia, M., & Benati, I. (2024). Negative effects of high public debt on health systems facing pandemic crisis: Lessons from COVID-19 in Europe to prepare for future emergencies. AIMS Public Health, 11(2), 477–498. https://doi.org/10.3934/publichealth.2024024
Ghorbani, A. (2022). Demand for Health and Healthcare. In A. Agrawal & S. Kosgi (Eds), Healthcare Access. IntechOpen. https://doi.org/10.5772/intechopen.98915
Harrod, R. F. (1939). An Essay in Dynamic Theory. The Economic Journal, 49(193), 14. https://doi.org/10.2307/2225181
Hennessy, C. A. (2004). Tobin’s Q , Debt Overhang, and Investment. The Journal of Finance, 59(4), 1717–1742. https://doi.org/10.1111/j.1540-6261.2004.00677.x
Igudia, P. (2021). Impact of External Debt Servicing on Human Capital Development in Nigeria: 1960-2019. International Journal of Business & Law Research, 9((3)), 38–55.
Jack, W. (1999). Principles of health economics for developing countries. World Bank.
Keynes, J. M. (2009). The general theory of employment, interest, and money: With a new introduction by Paul Krugman (Nachdr.). Palgrave Macmillan.
Lewis, W. A. (1951). The Principles of Economic Planning. By W. Arthur Lewis. (Washington, D. C.: Public Affairs Press. 1951. Pp. 128. Paper $2.00, Cloth $2.50.). American Political Science Review, 45(2), 611–611. https://doi.org/10.1017/S0003055400294161
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7
Ma, Y., Hu, M., & Zafar, Q. (2022). Analysis of the Impact of External Debt on Health in an Emerging Asian Economy: Does FDI Matter? Frontiers in Public Health, 10, 824073. https://doi.org/10.3389/fpubh.2022.824073
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477
Mill, J. S., & Crisp, R. (2010). Utilitarianism (Reprint. paperback). Oxford Univ. Press.
Muthuri, R. N. D. K., Senkubuge, F., & Hongoro, C. (2020). Predictors of Health-Related Quality of Life among Healthcare Workers in the Context of Health System Strengthening in Kenya. Healthcare, 9(1), 18. https://doi.org/10.3390/healthcare9010018
Nagel, K., Herzer, D., & Nunnenkamp, P. (2015). How Does FDI Affect Health? International Economic Journal, 29(4), 655–679. https://doi.org/10.1080/10168737.2015.1103772
Njuguna, D., & Wanjala, P. (2020). A Case for Increasing Public Investments in Health Raising Public Commitments to Kenya’s Health Sector (Policy Brief). Ministry of Health, Government of Kenya. https://sparc.africa/wp- content/uploads/2020/01/Kenya-Health-Financing-Policy-Brief.pdf
Numbeo. (2022). Health Care Index by Country 2022. https://www.numbeo.com/health- care/rankings_by_country.jsp?title=2015
Perrott, G. St. J., & Holland, D. F. (2005). Population Trends and Problems of Public Health. The Milbank Quarterly, 83(4), 569–608. https://doi.org/10.1111/j.1468- 0009.2005.00393.x
Republic of Kenya. (2010). The Constitution of Kenya, 2010. Nairobi, Government Printer. https://www.parliament.go.ke/sites/default/files/2017- 05/The_Constitution_of_Kenya_2010.pdf
Ricardo, D. (1817). On The Principles of Political Economy, and Taxation (third edition 1821). Batoche Books,. https://historyofeconomicthought.mcmaster.ca/ricardo/Principles.pdf
Romer, P. (1989). Human Capital And Growth: Theory and Evidence (No. w3173; p. w3173). National Bureau of Economic Research. https://doi.org/10.3386/w3173
Sarr, F., & Ba, M. (2017). The Capability Approach and Evaluation of the Well-Being in Senegal: An Operationalization with the Structural Equations Models. Modern Economy, 08(01), 90–110. https://doi.org/10.4236/me.2017.81007
Aladejare, S. A. (2023). Does External Debt Promote Human Longevity in Developing Countries? Evidence from West African Countries. Fudan Journal of the Humanities and Social Sciences, 16(2), 213–237. https://doi.org/10.1007/s40647-023-00365-1 DOI: https://doi.org/10.1007/s40647-023-00365-1
Alkire, S. (2002). Valuing Freedoms: Sen’s Capability Approach and Poverty Reduction (1st edn). Oxford University PressOxford. https://doi.org/10.1093/0199245797.001.0001 DOI: https://doi.org/10.1093/0199245797.003.0001
Annual Public Debt Management Report for financial year 2021/2022. (2022). Republic of Kenya, National Treasury and Economic Planning, Public Debt Management Office. Government of Kenya. https://treasury.go.ke/wp-content/uploads/2022/12/ANNUAL-PUBLIC-DEBT-MANAGEMENT-REPORT-2-12-2022.pdf?utm_source=chatgpt.com
Arrow, K., J. (1963). Uncertainty and the Welfare Economics of Medical Care. The American Economic Review, 53(5), 941-973 (33 pages).
Berkowitz, S. A. (2024). Health Keynesianism: Why Full Employment Policy Matters for Population Health. Journal of General Internal Medicine, 39(10), 1914–1916. ://doi.org/10.1007/s11606-024-08756-0 DOI: https://doi.org/10.1007/s11606-024-08756-0
Besley, T. (1988). A simple model for merit good arguments. Journal of Public Economics, 35(3), 371–383. https://doi.org/10.1016/0047-2727(88)90038-2 DOI: https://doi.org/10.1016/0047-2727(88)90038-2
Bosi, S., Camacho, C., & Desmarchelier, D. (2023). Human capital and welfare. Oxford Economic Papers, 75(2), 307–324. https://doi.org/10.1093/oep/gpac020 DOI: https://doi.org/10.1093/oep/gpac020
Chakraborty, B., & Gupta, M. R. (2006). A Note on the Inclusion of Human Capital in the Lucas Model. International Journal of Business and Economics, Vol. 5(No. 3), 211– 224.
Coccia, M., & Benati, I. (2024). Negative effects of high public debt on health systems facing pandemic crisis: Lessons from COVID-19 in Europe to prepare for future emergencies. AIMS Public Health, 11(2), 477–498. https://doi.org/10.3934/publichealth.2024024 DOI: https://doi.org/10.3934/publichealth.2024024
Ghorbani, A. (2022). Demand for Health and Healthcare. In A. Agrawal & S. Kosgi (Eds), Healthcare Access. IntechOpen. https://doi.org/10.5772/intechopen.98915 DOI: https://doi.org/10.5772/intechopen.98915
Harrod, R. F. (1939). An Essay in Dynamic Theory. The Economic Journal, 49(193), 14. https://doi.org/10.2307/2225181 DOI: https://doi.org/10.2307/2225181
Hennessy, C. A. (2004). Tobin’s Q , Debt Overhang, and Investment. The Journal of Finance, 59(4), 1717–1742. https://doi.org/10.1111/j.1540-6261.2004.00677.x DOI: https://doi.org/10.1111/j.1540-6261.2004.00677.x
Igudia, P. (2021). Impact of External Debt Servicing on Human Capital Development in Nigeria: 1960-2019. International Journal of Business & Law Research, 9((3)), 38–55.
Jack, W. (1999). Principles of health economics for developing countries. World Bank.
Keynes, J. M. (2009). The general theory of employment, interest, and money: With a new introduction by Paul Krugman (Nachdr.). Palgrave Macmillan.
Lewis, W. A. (1951). The Principles of Economic Planning. By W. Arthur Lewis. (Washington, D. C.: Public Affairs Press. 1951. Pp. 128. Paper $2.00, Cloth $2.50.). American Political Science Review, 45(2), 611–611. https://doi.org/10.1017/S0003055400294161 DOI: https://doi.org/10.1017/S0003055400294161
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7 DOI: https://doi.org/10.1016/0304-3932(88)90168-7
Ma, Y., Hu, M., & Zafar, Q. (2022). Analysis of the Impact of External Debt on Health in an Emerging Asian Economy: Does FDI Matter? Frontiers in Public Health, 10, 824073. https://doi.org/10.3389/fpubh.2022.824073 DOI: https://doi.org/10.3389/fpubh.2022.824073
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477 DOI: https://doi.org/10.2307/2118477
Mill, J. S., & Crisp, R. (2010). Utilitarianism (Reprint. paperback). Oxford Univ. Press.
Muthuri, R. N. D. K., Senkubuge, F., & Hongoro, C. (2020). Predictors of Health-Related Quality of Life among Healthcare Workers in the Context of Health System Strengthening in Kenya. Healthcare, 9(1), 18. https://doi.org/10.3390/healthcare9010018 DOI: https://doi.org/10.3390/healthcare9010018
Nagel, K., Herzer, D., & Nunnenkamp, P. (2015). How Does FDI Affect Health? International Economic Journal, 29(4), 655–679. https://doi.org/10.1080/10168737.2015.1103772 DOI: https://doi.org/10.1080/10168737.2015.1103772
Njuguna, D., & Wanjala, P. (2020). A Case for Increasing Public Investments in Health Raising Public Commitments to Kenya’s Health Sector (Policy Brief). Ministry of Health, Government of Kenya. https://sparc.africa/wp- content/uploads/2020/01/Kenya-Health-Financing-Policy-Brief.pdf
Numbeo. (2022). Health Care Index by Country 2022. https://www.numbeo.com/health- care/rankings_by_country.jsp?title=2015
Perrott, G. St. J., & Holland, D. F. (2005). Population Trends and Problems of Public Health. The Milbank Quarterly, 83(4), 569–608. https://doi.org/10.1111/j.1468- 0009.2005.00393.x DOI: https://doi.org/10.1111/j.1468-0009.2005.00393.x
Republic of Kenya. (2010). The Constitution of Kenya, 2010. Nairobi, Government Printer. https://www.parliament.go.ke/sites/default/files/2017- 05/The_Constitution_of_Kenya_2010.pdf
Ricardo, D. (1817). On The Principles of Political Economy, and Taxation (third edition 1821). Batoche Books,. https://historyofeconomicthought.mcmaster.ca/ricardo/Principles.pdf
Romer, P. (1989). Human Capital And Growth: Theory and Evidence (No. w3173; p. w3173). National Bureau of Economic Research. https://doi.org/10.3386/w3173 DOI: https://doi.org/10.3386/w3173
Sarr, F., & Ba, M. (2017). The Capability Approach and Evaluation of the Well-Being in Senegal: An Operationalization with the Structural Equations Models. Modern Economy, 08(01), 90–110. https://doi.org/10.4236/me.2017.81007 DOI: https://doi.org/10.4236/me.2017.81007
Schroyen, F. (2005). An alternative way to model merit good arguments. Journal of Public Economics, 89(5–6), 957–966. https://doi.org/10.1016/j.jpubeco.2004.05.006 DOI: https://doi.org/10.1016/j.jpubeco.2004.05.006
Schultz, T. W. (1961). Investment in Human Capital. The American Economic Review, Vol. 51,(No. 1), 1-17 (19 pages).
Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. In W. B. Todd (Ed.), The Glasgow Edition of the Works and Correspondence of Adam Smith, Vol. 2: An Inquiry into the Nature and Causes of the Wealth of Nations, Vol. 1. Oxford University Press. https://doi.org/10.1093/oseo/instance.00043218 DOI: https://doi.org/10.1093/oseo/instance.00043218
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65. https://doi.org/10.2307/1884513 DOI: https://doi.org/10.2307/1884513
Spengler, J. J. (1997). Adam Smith on Human Capital. American Economic Review, 67((1)), 32–36.
Swan, T. W. (1956). ECONOMIC GROWTH and CAPITAL ACCUMULATION. Economic Record, 32(2), 334–361. https://doi.org/10.1111/j.1475-4932.1956.tb00434.x DOI: https://doi.org/10.1111/j.1475-4932.1956.tb00434.x
United Nations Development Programme. (2022). Human Development Report 2021/2022: Uncertain times, unsettled lives: Shaping our future in a transforming world. United Nations. https://hdr.undp.org/content/human-development-report-2021-22 DOI: https://doi.org/10.18356/9789210016407
Uzawa, H. (1965). Optimum Technical Change in An Aggregative Model of Economic Growth. International Economic Review, 6(1), 18. https://doi.org/10.2307/2525621 DOI: https://doi.org/10.2307/2525621
Wafula, G. M., & Njaramba, S. G. (2024). EFFECT OF FOREIGN DEBT ON LITERACY RATE IN KENYA. European Journal of Economic and Financial Research, 8(3). https://doi.org/10.46827/ejefr.v8i3.1706 DOI: https://doi.org/10.46827/ejefr.v8i3.1706
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Gideon Makhanu Wafula
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
This work is licensed under a 