Browsing by Author "Chebet, Victoria"

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    Public Debt and Uganda’s Economic Growth
    (Kenyatta University, 2025-11) Chebet, Victoria
    Uganda, like many developing economies, has increasingly relied on borrowing to finance budget deficits and public investments. This growing dependence on debt has raised serious concerns about the country’s long-term economic growth and debt sustainability. Existing empirical evidence for Uganda and the wider region is mixed, and often does not distinguish clearly between the roles of external and domestic public debt or between short-run and long-run effects. This study explored the correlation between public debt and economic growth in Uganda, aiming to influence the causal impact of public debt (external and domestic debt) on economic growth and assess its impact. A comprehensive evaluation of theories regarding the correlation between public debt and economic growth was carried out, focusing on both positive and negative impacts. An Autoregressive Distributed Lag bounds testing approach was since variables used were integrated of order zero and one. The model was utilized to examine the evolving connection using time series data (1993–2023). The analysis shows that although external debt and domestic debt form part of a long-term equilibrium relationship with GDP per capita as indicated by the ARDL bounds test (F = 6.313 above all upper critical values), neither variable demonstrates predictive causality toward economic growth when tested individually. In the short run, external debt exerts a positive and statistically meaningful effect on economic growth (β = 0.1268, t = 2.91, p = 0.010), while inflation has a weak negative influence (β = –0.1604, t = –1.99, p = 0.063). Gross domestic savings also reduce gross domestic product per capita in the short run (β = –0.2291, t = –2.20, p = 0.042), whereas trade openness positively contributes to growth (β = 0.2402, t = 2.32, p = 0.033). Other variables including domestic debt, capital formation, human capital development, and foreign direct investment do not exhibit statistically significant short-run effects. In the long run, neither external public debt (β = –0.0289, t = –0.91, p = 0.377) nor domestic public debt (β = 1.0727, t = 1.59, p = 0.130) exhibits a statistically significant effect on real gross domestic product per capita. By contrast, gross domestic savings show a weak but negative association with economic growth (β = –0.2373, t = –2.00, p = 0.062), while trade openness exerts a positive and statistically significant long-run effect (β = 0.2488, t = 2.20, p = 0.042). However, most control variables are individually insignificant. Based on the findings, the study concludes that external debt supports economic activity only in the short run, while neither external nor domestic debt has a meaningful long-run effect on Uganda’s economic growth. Long-run performance is instead shaped more by structural factors such as domestic savings which exert a negative influence and trade openness, which consistently promotes higher gross domestic product per capita. Based on these findings, the study recommends that government priorities productive external borrowing, strengthen policies that deepen export competitiveness, and reform domestic savings mobilization to ensure savings are channeled toward investment rather than consumption. Strengthening debt management and enhancing the efficiency of public investment will also be essential for sustaining long-term economic development