The Influence of Foreign Aid on Public Expenditure in Kenya, 1970-2009

Abstract

The growth of public expenditure in Kenya has gone up in the last four decades .The paper looks into the influence of foreign aid on public expenditure in Kenya. The data used for the analysis was gathered from various issues of economic surveys undertaken by Kenya National Bureau of Statistics and World Bank reports and the coverage is from 1970 to 2009. The study applied Heller’s utility maximization model (1975), and Error- Correction methodology was used to prevent spurious regression results. The study reveals that the foreign aid plays a major role in the short run and long run in influencing development expenditure as opposed to recurrent expenditure in Kenya.