Effect of retirement benefits on the economic growth of Uganda (2000-2019)

Abstract

Pensions as a form of social security against old-age poverty and other uncertainties have attracted great interest virtually everywhere in the world, both in developed and developing countries, in recent times and there are several challenges and constraints that affect the effectiveness of the retirement benefit system in Uganda. This study aimed at determining the effect of retirement benefits on the economic growth of Uganda specifically looking at short run effect of retirement benefits on economic growth of Uganda, long run effect of retirement benefits on economic growth of Uganda and casual relationship between retirement benefits and economic growth of Uganda using time series data obtained from Uganda Retirement Benefits Regulatory Authority (URBRA), National Social Security Fund (NSSF) and World Bank Development indicators of 2000 through 2019. The findings indicated a statistically insignificant (t-statistic=0.169,coefficient=6.211) positive relationship between GDP and inflation rate and a percentage increase in the rate of inflation brings about 6.211% rise in GDP, a statistically significant (t-statistic=2.414,coefficient=3.139) positive relationship between GDP and retirement benefits and a percentage increase in retirement benefits increases GDP by about 3.14%. The results indicate a statistically significant (t-statistic=2.683, coefficient=4.822) positive relationship between GDP and waged and salaried workers as a percentage of total employment and a percentage of total employment brings about 4.82% rise in GDP. The results indicated a statistically insignificant (statistic=-0.086, coefficient=-2.16E+12) negative relationship between GDP and gross domestic savings. The study concluded that Inflation rate, retirement benefits and percentage of waged and salaried workers have influence on GDP in the long run at five percent level of significance whereas gross domestic savings do not influence GDP. The study recommended that the government of Uganda through BOU should adopt efficient inflation-adjusting and reducing strategies so as to keep the rate at mild level since mild inflation encourages investment which eventually increases the GDP.