The effect of foreign aid and institutional quality on economic growth in Uganda

Abstract

This study aims at understanding the effect of foreign aid and institutional quality on economic growth in Uganda for a period 1990 to 2021. Secondary data is used and sourced from the World Development Indicators and Ministry of Finance Planning and Economic Development. The variables considered are: Gross Domestic product growth, foreign aid, control of corruption, government effectiveness, political stability and absence of violence/terrorism, regulatory quality, rule of law and voice and accountability. The Autoregressive Distributed Lag (ARDL) model is used. The results show that in the long run Foreign aid (FA), Control of corruption (CoC), Government effectiveness (GE) and Regulatory quality (RQ) are positive and significant to Economic growth. In the short run, Foreign aid (FA), Control of corruption (CoC), Government effectiveness (GE) are negative and significant to Economic growth. The government therefore, should improve foreign aid quality by dividing foreign aid into smaller projects; ensure to maximize gains and impact from sourced foreign aid in developing the economy; and mobilizing the private sector to fully utilize the foreign aid.