Effect of Government Road Sector Spending on Economic Growth in Ethiopia

Abstract

Public expenditure was the main instrument used by Governments especially in developing countries to promote economic growth which was an essential ingredient for sustainable development The aim of this study was to analyze the effect of government road spending on economic growth in Ethiopia using annual time series data for the period 1993-2023. T\o do so, both descriptive and econometric analyses are employed in the study. From the descriptive analysis the findings indicate that the trend of government road sector spending has increasing for the past few years. Regarding the performance of road sector, the road network is by now growing at an encouraging rate. The issue of rural accessibility still remains far from the desired level that the country needs to have. Thus, the country needs to do a lot to graduate to middle income country status in terms of road network expansion and improved accessibility. The Econometric analysis, With the help of co integration and vector error correction analysis, the impact of government road spending on economic growth was assessed in the long-run as well as in the short-run. The findings reveal that government spending on road has a significant and positive effect on the economic growth (GDP) in the short-run as well as in the long-run. By way of recommendation, the government need to strengthen its support on road infrastructure through allocate more road financing to expand the road network with the aim of increasing the current rural accessibility, thus, improving agricultural productivity and market access of the poor rural population with the aim of boost the current economic growth.