Uganda’s experience with debt and economic growth: an empirical analysis of the effect of public debt on economic growth—1980–2016
Tóm tắt
Empirical evidence on the effect of public debt on the economic growth of a country remains ambiguous. No theoretical convergence on the respective nexus has been attained. For the case of Uganda in particular, the public debt question remains critical in the country’s development trajectory. Under the Highly Indebted Poor Countries (HIPCs) initiative, Uganda was the first country to receive a debt relief of worth US$650 million in the 1990s and later in 2006, under the Multilateral Debt Relief Initiative (MDRI), the country generously received 100% debt forgiveness/cancelation which consequently reduced the stock of country’s debt to $1.6 billion. However, of recent, the debt stock has kept on increasing from UGX 14.257 trillion ($5.5 billion) in 2000 to the current UGX 35.3 trillion (9.8b) in July 2017 and it is projected to continue increasing in the short to medium term given the robust NDPII core projects and priorities which are set to attract more borrowing. The study employs the Auto Regressive Distributed Lag (ARDL)-bounds testing approach which is superior and suitable for our small sample. The results reveal that public debt has a significant negative impact on economic growth in short run whereas in long-run debt has a mixed impact on Uganda’s economy. The total debt service has a negative impact whereas Gross debt as a share of GDP has a positive impact on the economy. The findings also reveal that Public debt has a negative effect on Uganda’s economic growth in the short run. The impact is however found to be positive in the long run. This result is in line with the study expectations and some findings by earlier researchers who found a negative impact of public debt on GDP and investment. The results suggest that the current trend of Uganda’s borrowing is to continue constraining the resources in the short run. The conclusion of the study in view of emerging findings especially on debt, various policy implications have emerged. At the current rate of borrowing, Uganda is likely to have deteriorating economic growth partly because such public borrowing adversely affects investment. The study thus recommends for policies geared toward efficient use of borrowed funds especially for such projects that have high potential to unlock the production capabilities of the country. There is a need for the government of Uganda to institute mechanisms to ensure efficient use of borrowed funds.
Tài liệu tham khảo
Abbas A (2005a) Public Debt Sustainability and Growth in sub-Saharan Africa: The Role of Domestic Debt”, GDN Project on the Macroeconomics of Low-Income Countries. “Public Domestic Debt and Economic Growth in Low-Income Countries. Mimeo, Department of Economics, Oxford University, New York
Abbas, S. M. (2005) “Public Debt Sustainability and Growth in Post-HIPC Sub-Saharan Africa: The Role of DD” Paper for GD Net’s 2004/05 project on Macroeconomic Policy Challenges of Low-Income Countries
Abbas SA, Christensen MJ (2007) The role of domestic debt markets in economic growth: an empirical investigation for low-income countriesand emerging markets, vol No. 7–127. International Monetary Fund
Adam CS, Bevan DL (2005) Fiscal deficits and growth in developing countries. J Public Econ 89(2005):571–597
African Economic Outlook (2018): https://www.afdb.org/en/news-and-events/african-development-banks-economic-outlook-shows-decline-in-regionaleconomies-17937
AFRODAD African Forum and Network on Debt and Development (2013) Owning the loan—The Case of Uganda study report
Agénor P-R, Montiel P (1996) Development Macroeconomics. Princeton University, Princeton
Ayres RU, Warr B (2002) Economic growth models and the role of physical resources. In: Bartelmus P (ed) Unveiling wealth: on money, quality of life, and sustainability. Springer, Dordrecht
Banerjee A, Dolado JJ, Mestre R (1993) ECM tests for cointegration in a single equation framework. Oxford University Press, Oxford
Bank of Uganda (2017) State of economy Report
Buchanan, J. M. (1958), Public Principles of the Public Debt, Homewood, Illinois
Burhanudin MDA, Muda R, Nathan SBS, Arshad R (2017) Real effects of government debt on sustainable economic growth in Malaysia. Journal of International Studies 10(3):161–172. https://doi.org/10.14254/2071-8330.2017/10-3/12
Casadio P, Paradiso A, Rao BB (2012) Estimates of the steady state growth rates for some European countries. Econ Model 29(4):1119–1125. https://doi.org/10.1016/j.econmod.2012.03.018
Cecchetti SG, Mohanty MS, Zampolli F (2010) The Future of Public Debt: Prospects and Implications. BIS Working Papers No. 300, Basel: Bank for International Settlements
Chongo BM (2013) An econometric analysis of the impact of public debt on economic growth: the case of Zambia; A Dissertation Submitted to the University of Zambia in Partial Fulfilment of the Requirement for the Degree of Master of Arts in Economics
Dasgupta D (2010) Modern Growth Theory. Oxford University Press, Oxford, pp 67–68. https://doi.org/10.1016/j.iimb.2012.01.002
Dereje Abera Ejigayehu (2013). The Effect of External Debt on Economic growth: Department of economics Magisteruppsats 30 hp | Vårterminen 2013
Diamond PA (1965) National debt in a neoclassical growth model. Am Econ Rev 55:1126–1150
Dixit A, Pindyck R (1994) Investment under uncertainty. Princeton University Press, Princeton
El-Mahdy AM, Adel NM (1999) Public debt sustainability & economic growth in Egypt. J Commerc Stud Res 19(1):21–55
Elmendorf D, Mankiw N (1999) Government Debt.In: Taylor JB, Woodford M (eds) Handbook of macro Economics, Vol.1, Elsevier science, B.V 1615-1699
Empirical Investigation for Low Income Countries and Emerging Markets. IMF working Paper No. 07/127, International Monetary Fund, Washington, D. C
Gujarati DN (1995) Basic econometrics, 3rd edn. Tata McGraw Hill Publishing Company Limited, New Delhi
Hassan MH and Akhter T, Impact of Public Debt Burden on Economic Growth: Evidence from Bangladesh (December 1, 2012). Journal of Finance and Banking, Vol. 10, No. 1 & 2, June–December 2012, University of Dhaka, Bangladesh
Kumar M, Woo J (2010), Public debt and growth, IMF Working Paper 10/174
Laurenceson J, Chai JCH (2003) Financial reforms and economic development in China. Edward Elgar, Cheltenham, pp 1–28
Mankiw NG, Romer D, Weil DN (1992) A contribution to the empirics of economic growth. Q J Econ 107(2):407–437
Meade JE (1958) Is the national debt a burden?. Oxford Economic Papers, New Series, Oxford
Ministry of Finance planning and Economic Development (2017) Public debt, Guarantees, and other financial liabilities report for FY 2017/18,
Modigliani F (1961) Long-run implications of alternative fiscal policies and the burden of the national debt. Econ J 71(284):730–755
Muinga RM (2014) External Public Debt and Economic Growth in Kenya, Research Paper Submitted to the School of Economics in Partial Fulfillment of the Requirements for th Award of the Degree of Master of Arts in Economics of the Unversity of Nairobi
National Planning Authority (NPA) (2010) Uganda Vision 2040
Ouattara B (2004) The Impact of Project Aid and Programme Aid on Domestic Savings: A Case Study of Côte d’Ivoire. Centre for the Study of African Economies
Oxfam (2016) who is growing; Ending inequality in Uganda, A study of the drivers of inequalities in Uganda. 333
Pattillo C, Poirson H, and Ricci L (2002), External Debt and Growth, IMF Working Paper
Pesaran HM and Shin Y (1995) “Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis”, DAE Working Paper Series No. 9514, Department of Applied Economics, University of Cambridge
Pesaran MH, Shin Y (1997) An autoregressive distributed lag modelingapproach to cointegration analysis. University of Cambridge, England
Pesaran HM, Shin Y, Smith RJ (2001) Bounds testi approaches to the analysis of level relationships. J Appl Econ 16:289–326
Research Journal of Finance and Economics ISSN 1450-2887. Issue 20 (2008)
World Development Report 2015: Mind, Society, and Behavior. World Bank Headquarters C Building 1818 H Street NW Washington, D.C.