Effect of Kenya’s External Debt Sustainability on Militarisation and Crime Rate in Kenya (1993-2023)

A Time Series Analysis

Abstract

In this paper, the complex relationship between external debt sustainability and national security outcomes in Kenya is addressed through an analysis of indicators of militarisation and crime rates. The study examines the direct and indirect effects of debt sustainability on security outcomes from 1993 to 2023, focusing on militarisation and from 2004 to 2023, on crime rates, using Vector Autoregressive (VAR) models with time series data. Diagnostic tests, such as the Augmented Dickey-Fuller test, KPSS test, Johansen cointegration analysis, and multiple lag selection criteria, were used to pre-estimate the absence of long-term relationships among the variables, thereby justifying the use of the VAR method over alternative models. The findings indicate complicated interactions: although the external debt sustainability does not have a direct impact of any importance on existing military spending or the crime rate, there are crucial feedbacks via socio-economic mediators. Historical military expenditure has a positive impact on external debt (14.79, p < 0.10), indicating that security investments are counterintuitive to fiscal sustainability. Urbanisation negatively impacts debt sustainability (-594.36, p < 0.05), indicating demographic pressures on fiscal resources. Research indicates that important debt-to-GDP levels are between 55% and 60%, at which security effects become increasingly evident in a non-linear manner. Combined with the results, the sustainability of debt in the area is the primary factor affecting security through indirect channels (including unemployment, urbanisation and budgeting restrictions), rather than having direct budget implications. Policy recommendations, such as the institution of integrated debt-security monitoring tools, targeted intervention in high-risk cities, and flexible military budget preparation that takes into account fiscal sustainability levels, can be suggested. The study can help maximise the knowledge of the impacts of fiscal constraints spilling over to security lapses in developing economies.