Domestic Debt Management: Effects Of Government Borrowing On Private Credit: The Case Of Kenya

This study aimed at finding out the effects of government borrowings on private credit. Time series data was used covering the period 1970 to 2006. Domestic borrowing was found to have an incomplete crowding out effect on private credit. The study also revealed that the domestic borrowing does not impact on private credit through interest rate and credit availability seem to be more relevant for the case of Kenya. This was attributed to the fact that government interventions still play a significant role in the financial sector. The study concludes that despite the fact that the ratio of domestic debt to GDP ratio is modest, domestic borrowing still absorbs a large share of financial resources, given the low and under developed financial market.