Title:
Effect of Foreign Aid On poverty in Kenya

Authors:
Don Okello, Prof.John Byaruhanga, Dr.Edwin Simiyu, Dr.Angela Mungai, Kenya

Abstract:

This article investigates the effect of foreign aid on poverty in Kenya. Poverty has emerged as one of the main public concerns across the globe. Every year, the gap between rich and poor grows wider, and many countries' circumstances have deteriorated. In Kenya, the wealth disparity has reached extreme proportions, with less than 10% of the population owning more wealth than the bottom 90%. Kenya is a developing country that aims to be industrialized by 2030.Economic growth is expected to increase in order to achieve the vision 2030, so the government must also understand the trends, causes, and effects of poverty in order to formulate relevant policies to ensure equitable income distribution and high living standards by 2030.In order to establish the existing relationship, the study investigated the effect of foreign aid on poverty in Kenya. This study made use of time series data spanning from years 2010 to 2020. The study employed causal-effect research design to establish the relationship between poverty and foreign aid. Augmented Dickey Fuller test for unit root revealed the presence of unit root at levels but on first difference, the variables were stationary. Variance inflation factor (VIF) test was 1.06<10 showing no multi-collinearity. Durbin test statistic was 1.931<2.5 which indicated no serial correlation. Descriptive statistics such as measure of dispersion was done to show general characteristics of the sample. Correlation analysis on the other hand revealed a negative and moderate relationship between foreign aid and poverty (-0.5331). Johansen test for cointegration showed that there are three co-integrating equations. Model regression estimates were,(-1.330267,p< 0.0500).The study recommends that; the government should create an enabling environment for investors, ensure that the foreign aid money does not device debt. The central bank should also closely monitor the interest rate movements, public speculation and political situation so as to manage the volatility of the exchange rate of Kenya shilling against other currencies.

DOI: http://dx.doi.org/10.51505/ijebmr.2022.6917