The impact of public debt on Uganda's economic growth
Abstract
The objective of the study was to establish the impact of public debt on economic growth in
Uganda by analysing the short run and long run relationships. The study employed
secondary quarterly time series for the period 1990Q1 to 2015Q4. The Johansen Cointegration
test, Vector error correction model (VECM) and the wald granger causality test
were performed. The empirical results suggested the existence of a statistically significant
negative short run and long run relationship between economic growth and public debt but no
causality between public debt and economic growth in the long run. These findings have
strong implications in terms of macroeconomic policy management and likely to have
detrimental effects to the economy. In conclusion, the results suggest that both in the short
and long run periods, an increase in Uganda’s public debt will lead to a decrease in the
country’s economic growth. Therefore, there is need for the Ugandan government to
undertake measures to improve on the revenues collected to reduce debts incurred and
adoption of more prudent macroeconomic policies like attraction of foreign direct investment
to build a private sector led economy.