Government expenditure and economic growth in Uganda

Abstract

This study investigates the effect of Government expenditure (disaggregated into capital and recurrent) on economic growth in Uganda using secondary data time series for the period 1985-2020. The data was obtained from various sources i.e. the Ministry of Finance, the World Bank database and Bank of Uganda. The paper employs the Autoregressive Distributed Lag (ARDL) model and to avoid spurious regressions, the study accounts for the unit root test and co-integration analysis using the bounds test. The key findings of the study are that capital expenditure has a negative and significant impact on economic growth in the long run while recurrent expenditure has a positive significant impact on economic growth in the long run. The study recommends that government should close any efficiency gaps in the implementation of governments developmental spending so as to realize maximum growth gains from capital expenditures. It also recommends that government identifies the areas under recurrent spending that create the largest growth gains and prioritize its recurrent spending budget to these areas.