Fiscal Policy Variables and Industrial Growth in Uganda

Benjamin Musiita, Frederick Nsambu Kijjambu and John Bosco Nsengiyumva

Journal of Social and Development Sciences, 2025, vol. 15, issue 3, 25-42

Abstract: This study examines the effect of government spending, taxation, and borrowing on the development of Uganda's manufacturing sector in both the short and long term based on the ARDL model. The study was focused on three main objectives: examining the role of government consumption expenditure, the effect of value-added tax (VAT), and the role of short-term debt on manufacturing value-added (MVA). The results show that government spending contributes slightly to MVA in the short term but supports growth in the long term. VAT contributes to MVA in the short term but reduces it in the long term, showing how excessive taxation can damage industrial competitiveness. Short-term debt reduces the growth of MVA in the short term but is positive in the long term, showing the need for careful management of debt. In general, the evidence suggests that firm government support, moderate taxation, and prudent borrowing are central to the development of Uganda's manufacturing. However, the study identifies a number of limitations, such as the reliance on secondary data, exclusion of possible determinants, and failure to fully establish causality. It recommends that future research take into account a wider range of variables and more disaggregated data in an effort to shed more light on the determinants of manufacturing growth.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:rnd:arjsds:v:15:y:2025:i:3:p:25-42

DOI: 10.22610/jsds.v15i3(S).4762

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