Macroeconomic determinants of fiscal deficits in Uganda: 1980-2004

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University of Dar es Salaam
Fiscal deficits in Uganda have worsened in recent years, bringing back to the foreground the important debate on what macroeconomic variables help explain such sharp changes. This study sought to put into perspective a possible range of explanatory variables for the recent deficit trend. Both descriptive and quantitative technique, taking into account the recent development in time series modeling (testing for unit roots and countegration) was used. The study used quarterly data covering the period 1980-2004. The empirical results suggest that changes in fiscal deficits are driven, among others by aid, government expenditure and revenue collections. In view of the empirical evidence, it is suggested that in order to curtail the ever growing deficits there is need to close leakages to tax revenue collection and widen the tax base in order to improve the ratio revenue to GPD and reduce reliance on aid. In addition, efforts to reduce government spending especially in non-critical areas such as the high cost of public administration should go a long way in reducing the deficits. This study suggests that large fiscal deficits, even if entirely funded by donor aid, will prove counterproductive for poverty reduction strategies because of their adverse impact on the private sector and on long term economic growth.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HJ2216.U33G8)
Macroeconomics, Fiscal policy, Budget deficits, Uganda
Guloba, M (2005) Macroeconomic determinants of fiscal deficits in Uganda: 1980-2004.Master dissertation, University of Dar es Salaam, Dar es Salaam.