The Impact of Government Expenditure on Economic Growth in Afghanistan

This study evaluates the impact of expenditure compositions on economic growth in Afghanistan. The data was collected from the World Bank and Ministry of Finance using a period of 2004 to 2019. The gross domestic product was stated as dependent variable and public expenditure compositions were included as independent variables. The adjusted Keynesian function was applied to estimate the impact of government expenditure on economic growth. Unit root test, Johansen co-integration test and bound test were checked. All variables were stationary at level and first difference. Hence, Autoregressive Distribution Lag (ARDL) model was applied. Our findings expose that there is a long-run relationship between dependent and independent variables. Furthermore, the previews and current expenditures on education and infrastructure are positively correlated with economic growth in Afghanistan. But, security expenditure is negatively linked with growth rate. The adjusted R-squared revealed that 99% variation of dependent variable explained by independent variables. To increase the economic growth rate, the government should adopt precise and accurate control on its spending on defense, as to reduce corruption and mismanagement.