The relationship between government investment in infrastructure and economic growth in Kenya

Abstract

Core economic infrastructure in the areas of energy, transportation, and water and sewerage – has always played important roles in maintaining economic performance. However, the rate of public investment in these core areas began falling in the 1970s and has not returned to its previous levels since then. The Kenyan public infrastructure has deteriorated badly after the past generation of neglect. With no doubt, the result of declining and insufficient investments has been a worsening infrastructure deficit and mounting investment needs. The objective of this study therefore, was to establish the relationship between government investment in infrastructure and economic growth in Kenya. This study adopted a descriptive research design. In this study emphasis was given to secondary data which was obtained from the Government development expenditure in infrastructure obtained from Economic Survey reports published by the Kenya National Bureau of Statistics. The data included the government investments in infrastructure and also economic growth data from CBK covering a period of ten years between 2005 and 2012. In order to test the relationship between the variables the inferential tests including the regression analysis was used. The study found that, government investment in infrastructure development had a positive and significant effect on economic growth in Kenya for the period of this study. The study recommends that adequate funding should be directed towards infrastructure projects preparation, implementation and maintenance. The study suggests that proper reform policy should be complemented with the availability of necessary infrastructures that are important for the economic development in the country. There should be established Initiative focusing on the political championing and sponsoring of specific infrastructure projects with potential impact on economic integration. Emphasis should also be given on developing public-private partnerships (PPPs) and encourage increased joint-venture project development between multinational firms and local enterprises for infrastructure development.