📄 Abstract
Uganda’s pursuit of rapid and sustained economic transformation has increasingly depended on the interaction between external sector integration and domestic fiscal policy. Despite decades of trade liberalization, rising foreign capital inflows, and expanding public expenditure, the country continues to grow below the threshold required to achieve the ambitions of the Fourth National Development Plan (NDP IV). This study examines the short- and long-run relationships between trade openness, government expenditure, foreign direct investment and economic growth in Uganda over the period 1990–2024. Motivated by Uganda’s persistent growth gap relative to the 10.1% annual growth target under the NDP IV tenfold growth strategy, the study applies the Autoregressive Distributed Lag bounds testing approach to annual World Bank data. The results confirm a statistically significant long-run cointegrating relationship among the variables, with the bounds test F-statistic of 12.356 exceeding the upper critical bound. Long-run estimates show that trade openness and government expenditure are positive and significant drivers of economic growth: a 1% increase in trade openness is associated with a 0.419% rise in GDP growth, while a 1% increase in government expenditure raises growth by 0.360%. In contrast, foreign direct investment records a negative but statistically insignificant coefficient of -0.200, suggesting that Uganda has not fully converted foreign capital inflows into broad-based productivity gains. The error correction term is negative and highly significant at -0.998, indicating that nearly 99.8% of short-run disequilibrium is corrected within one year. These findings imply that Uganda’s growth prospects depend less on openness and capital inflows alone than on the economy’s capacity to absorb, link and transform them through productive public investment, infrastructure, domestic firm upgrading and stronger sectoral linkages. The study contributes to the growth literature by providing recent Uganda-specific evidence on the interaction between external openness, fiscal policy and long-run macroeconomic performance.
🏷️ Keywords
📚 How to Cite:
Ainomugisha Elisha, Arinaitwe Aggrey , TRADE OPENNESS, GOVERNMENT EXPENDITURE, FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN UGANDA , Volume 13 , Issue 6, June 2026, EPRA International Journal of Economics, Business and Management Studies (EBMS) , Pages: 1 - 12 , DOI: https://doi.org/10.36713/epra28204