Fiscal and monetary drivers of public debt in Uganda: evidence from an autoregressive distributed lag framework

Abstract

ganda's public debt has risen markedly after the debt relief of the 2000s, increasing concern about the fiscal and macroeconomic forces sustaining renewed accumulation. This study examined the short-run and long-run relationships between public debt and government expenditure, government revenue, real gross domestic product growth, and the Uganda shilling-United States dollar exchange rate over 2000–2024. Military expenditure was evaluated in a supplementary specification because it is a component of total government expenditure. The study used secondary annual macroeconomic data from the International Monetary Fund, World Bank, and Stockholm International Peace Research Institute. The annual series were converted to quarterly frequency using the EViews frequency-conversion procedure, log-transformed where appropriate, and analysed using the autoregressive distributed lag bounds-testing and error-correction framework. The main-model bounds statistic of 21.793 confirmed cointegration. In the long run, government expenditure was positively associated with public debt (7.788, p < .001), whereas government revenue (-12.853, p = .024) and economic growth (-0.493, p = .011) were negatively associated with debt. Exchange-rate depreciation had a positive effect that was significant at the 10% level (5.192, p = .067). In the short run, expenditure and depreciation increased debt, revenue reduced it, and growth was statistically insignificant. The supplementary model also confirmed cointegration (F = 32.928); military expenditure had a positive but weak long-run association with debt (0.018, p = .095), while revenue remained debt-reducing and depreciation debt-increasing. Residual and stability tests supported model adequacy. The findings indicate that Uganda's debt dynamics reflect the interaction of expenditure pressure, limited domestic revenue, growth performance, and foreign-currency valuation risk. Sustainable debt management therefore requires coordinated expenditure control, revenue mobilisation, growth-enhancing investment, and active management of exchange-rate exposure.