The Effect of Recurrent Budget Expenditure on the Growth of Agricultural Sector in Tanzania

Abstract

Establishing a correlation between the public agricultural expenditure and agricultural growth basing on the budgetary process is vital. The paper attempts to analyze the effect of recurrent budget expenditure on the agricultural sector growth in Tanzania. The relevant times series data from 2004 to 2018 were obtained from secondary sources. After the preliminary test for unit roots, the Augmented Dickey–Fuller test was employed to determine both the short and long run relationship co-integrating Error Correction Mechanism and Autoregressive Distributed Lag model. The recurrent expenditure in agricultural sector have positive long-run relationship effect to the respective sector. It was revealed that when there is 1% point increase in agricultural recurrent expenditure to budget percentage ratio, the growth rate increases by 0.3326%. Moreover, even incensement of 1% point increase in the agricultural recurrent expenditure; the sector’s contribution on the Gross Domestic Product declined from 46.4 to 28.8% in 2004 and 2018 respectively and the agricultural sector growth increased from 4 to 5.9% in 2004 and 2018 respectively. The study recommends that the Tanzania government needs to increase more budget allocation and review its associated policies to develop the agricultural sector.