Public Expenditure in Ethiopia: Trend and its Significance

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Addis Ababa University


Improvement of life of citizens through public expenditure has raised questions for a number of years. Moreover, different theories were framed and varieties of policies were articulated on the importance of public expenditure and its significance to growth. This paper examines the impact of public expenditure (disaggregated into recurrent and capital expenditure) on economic growth from 1973 to 2005 E.C. Three variable multiple regression model was adopted while recurrent expenditure and capital expenditure were used as independent variables and gross domestic product - GDP, as dependent variable. The results suggest that both recurrent public expenditure and capital expenditure had positive and significant impact on economic growth. This necessitates the government to follow a parallel movement among these expenditures and avoid doing one at the expense of another as the nation should not be starved today for the return of tomorrow. Moreover, trend of capital expenditure is increasing that, if continued, shows the country‟s bright future in capital investment if it is properly managed and free from misallocation.



Public Expenditure in Ethiopia