Governments need resources for public expenditure. These resources are mainly obtained from taxes and borrowing both from domestic market and abroad. When external public debt is spent on productive investment activities, it creates macroeconomic stability in the country which results to capital inflow that has positive effect on domestic savings, investment and economic growth. Debt or loan whether from external or internal sources can be classified as either productive or unproductive (dead weight) debt depending on its uses. The general objective of this study was to evaluate the effect of public debt on economic growth in Kenya. This study used secondary data from Kenya National Bureau of Statistics and Central Bank of Kenya spanning from 1996 to 2015. The variables of our study are GDP, external debt, internal debt and productive debt. A regression model was used to illustrate the relationship between dependent and independent variables. The main findings of our study was that there was a negative relationship between external public debt and economic growth, a significant positive relationship between internal public debt and economic growth and a positive relationship between productive debt and economic growth in Kenya between 1996 and 2015. Further studies should focus on an investigation on the level at which Kenya can comfortably sustain its debts in order to make an appropriate decision on whether to ask for debt amnesty on the current debt or not. Future research on the effect of public debt on private investments should also be done. This would offer information to policy makers on whether it would be appropriate to re-schedule debt in order to minimize the amount spent on servicing the debt and use the saving on domestic investment.

KEY WORDS: Public Debt, Economic Growth, External debt, Internal debt, Productive debt.