Does External Public Debt Affect Health Status in Kenya? Evidence from Time Series Data

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.