African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4180

Article in Press

Effects of BRI Infrastructure Investment on Economic Growth in East Africa: The Mediating Role of Financial Development and Trade Balance

Pengyu Ren, Ibrahim Sakouba, Dafia Chabi Simin Najib and Kasonga Kabangu Serges Marc

  •  Received: 03 August 2022
  •  Accepted: 10 January 2023
This study explores the impact mechanism of China’s Belt and Road Initiative (BRI) infrastructure investment on economic growth in East African countries, including Ethiopia, Kenya, Tanzania, Uganda and Rwanda. Using a dataset from the World Bank on the BRI project, the study shows that the role of BRI infrastructure investment in promoting economic growth in East Africa is played directly through the reductions in shipment times and trade costs and indirectly through the financial development and China-East Africa trade balance. The study combines the fixed effects technique with the mediating effect analysis and finds that the contribution of the BRI infrastructure investment to the regional growth is 0.11% between 2013 and 2021, with Ethiopia having the highest growth payoff of about 0.3%, followed by Kenya 0.15%, Rwanda 0.05%, Uganda 0.03%, and Tanzania 0.02%. In addition, the study finds that about 20% of the total effect of BRI infrastructure on economic growth is transmitted through financial development. In comparison, about 48% of that effect on economic growth is transmitted through the China-East Africa trade balance. These findings imply that the trade balance has the most significant mediating effect on the relationship between BRI infrastructure investment and economic growth in East Africa.

Keywords: Iinfrastructure investment; economic growth; financial development; trade balance, mediating effect; Belt and Road Initiative.