Foreign Aid and the Political Economy in Kenya

Abstract

Globally, foreign aid forms one of the largest components of foreign capital flows to low-income countries. For the last four decades, countries of Sub-Saharan Africa including Kenya have relied on external aid to alleviate poverty and address underdevelopment. Up to 2015, global foreign aid stood at $152.5 Billion with $45.8 billion given to Sub Saharan African countries and $2.5 billion given to Kenya. However, current socio-economic indicators reveal that Kenya, just like other Sub Saharan African countries, is fairing worse as compared to Asian Tigers with unemployment rate at 40.0%, poverty rate at 57.0%, indebtedness at 52.8% of GDP and economic growth rate of 5.5% despite 30.13% of global foreign aid given to Sub Saharan African countries. Past studies have hardly focused on the nexus between foreign aid and the resultant political economy status in Africa and whether foreign assistance has any impact in Africa as it is still caught up in poverty and remains behind the developing world. Similarly, studies in the contexts of the relationship between foreign aid and political economy have yielded mixed results with some indicating positive and others negative results. The purpose of this study was to examine the nexus of foreign aid, Kenya‟s political economy and outcomes in macro-economic policies. Specifically, the study examined the (i) sources and motive of foreign aid(ii) the nature and status of foreign aid, (iii) the challenges accompanying the injection of foreign aid on Kenya‟s political economy. The study significance was outcomes of principled and parochial aid and growth relations. The study used the inter-dependencyand modernization theories to conceptualize and model the relationship between the foreign aid, political economy and macro-economic policies in Kenya. Population sample were heads of departments in GOK, donor embassies missions and NGOs. The study used mixed and cross-sectional survey (descriptive and inferential) design method for both quantitative, qualitative and secondary, data sampling used both stratified random and purposive techniques to sample 191 respondents. A questionnaire was used as the tool for collection of primary data while secondary data was collected through content analysis, annual reports, Journals and publications. The data was analyzed using descriptive statistics (percentage and frequencies), and inferential. The study found a positive and significant relationship within index of foreign aid source and motive, nature and status, including outcomes in the use, the political economy and macroeconomic policiesin Kenya. Since the results show positive relationship, the study concluded that foreign aid significantly influences the political economy in Kenya. The study recommended government of Kenya in sourcing foreign aid and not parochial motive driven donors, further studies to be undertaken to conclude studies in constructivism in political economy of Kenya, Realism in political economy and divergence from the dependency syndrome and principled reception of foreignaid.