Economic determinants of budget deficits in Uganda
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The study was to investigate the economic determinants of the budget deficits in Uganda. The objectives of this study were to: study the relationship between budget deficits and selected macro-economic variables; inflation rates, interest rates, GDP, and the exchange rates in Uganda. The methodology included the tests of hypothesis and multi linear regression to access the impact of the variables on the budget deficits. Data used was secondary data from the bank of Uganda, Ministry of Finance, planning and economic development (MoFPED). At univariate stage, inflation rates are highly skewed, while GDP, bank rate to commercial banks, exchange rate, lending rates and budget deficits are normally skewed. At the bivariate stage, GDP, Bank rate to commercial banks, lending rates and exchange rates have a negative relationship with budget deficits while inflation has a positive relationship with budget deficits. Generally at the multiple regression analysis, the results from the study clearly shows that the Inflation rate and Bank rate to commercial banks have a positive effect on Budget deficits while GDP, Exchange rate and Lending rate have a negative effect on budget deficits. Therefore, the government should invest in more productive activities so as to increase on the goods and services produced in the country. The central bank should regulate money supply so as to ensure a mild inflation which is favourable for economic growth and stability of the Uganda shilling so as to be able to improve the BOP position.