Effect of increasing public debt on economic growth of Uganda

Abstract

The paper discusses the effect of public debt on economic growth in Uganda. The paper also analyzes the trend in public debt of Uganda. It uses time series data for the period 1997 to 2016. The data is analyzed using STATA employing OLS method and the limitations of the study are specified. The paper shows that public debt has a positive effect on GDP per capita as a measure of economic growth in Uganda. Inflation has a negative relationship with GDP per Capita. This implies that as increase of public debt will increase economic growth, inflationary pressures will arise and this will make the Ugandan shilling ineffective as it will have to lose its confidence. Increase in public debt will also increase interest payments this increasing the debt burden the next generation. While in the short run, the government needs proper management of resources borrowed from other governments. The trend of public debt to GDP per capita was also discussed in the study which was relatively upward sloped. The study recommended that government also needs to check the projects in which to invest as long term project may take long to produce returns enough to sustain debt servicing and growth of the economy. In Addition, the study discussed other areas where further research would be carried out to cub the problem of public debt and the areas where the government is lacking in terms of public debt management and utilization.