Influence of public expenditure budget on the agricultural growth in Tanzania, 2004-2018

Abstract

Public expenditure plays a crucial role in the performance and growth of the sector. This study analyzes the contribution of public expenditure to the growth of the agricultural sector in Tanzania from 2004 to 2018. Using the Error Correction and Autoregressive Distributed Lag models, the analysis employed the Augmented Dickey-Fuller unit root test, Johansen cointegration, and Granger causality to explore both short- and long-run relationships. The results revealed a positive relationship between agricultural recurrent expenditure and sector growth, with a 1% increase in the recurrent expenditure budget ratio leading to a 0.3326% increase in the growth rate. Conversely, a 1% increase in agricultural development investment expenditure corresponds to a 0.1034% decrease in the growth rate, indicating a negative long-run relationship. The study concludes that while public agricultural expenditure positively impacts sector growth, an effective synergy between increased public resources and appropriate macroeconomic policies is essential to enhance agricultural growth and investment in Tanzania. The findings underscore the importance of strategic budget allocations and policy frameworks in driving sustainable agricultural development.