IMPACT OF FOREIGN FINANCIAL AID ON UGANDA’S ECONOMIC GROWTH
IMPACT OF FOREIGN FINANCIAL AID ON UGANDA’S ECONOMIC GROWTH
Mohammed Hussein - Masters of Economics, Turkey University, Turkey
Prof. Dr. Aydin Çelen - Istanbul ticaret üniversitesi, Turkey
ABSTRACT
The study examines the influence of foreign donor aid on the performance of Uganda's economy for the period 2000-2020 using time series data gathered from World Bank's development standards. The study will be focused on the production normal function where donor aid involved in the production process acts as one of the inputs. Phillip Peron's unit root test will be done. Besides the main focus, this paper also examines the link between growth and aid. Massive foreign aid inflows to sub-Saharan Africa and persistent economic output and extreme poverty in the locations are sparking intense discourse about the accomplishment of these initiatives. The study using a linear regression analysis looks at foreign financing aimed at attaining economic development in SSA with a focus on Uganda. Results show that foreign aid inflow significantly reduced economic growth in Uganda in the short run and long run. The domestic investment was significant and had a positive sign in the short run while exports increased output in the short and long run. Dummy variable for insecurity increase output in the short run and increased it in the long run. The study identified previous periods of democracy index and effective labor to have negatively affected output in the short run. In the long run, effective labour force, exports, Dummy variable for insecurity and democratic index was found to increase output in the long run. This study contributes to the literature on foreign aid and economic growth by providing the theoretical and empirical evidence for Uganda.
