CHAPTER FIVE:

CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion
The major aim of this study was to empirically establish the impact of foreign aid on Ugandas
economic growth using a single equation error correction model where it was established that
foreign aid in Uganda does not significantly influence the process of economic growth. However
it displayed an unexpected negative sign. The study was based on the production function where
foreign aid entered into the production function as one of the inputs. Analytically, the study used
a single equation error correction model where inflation rate was found to be statistically
significant. Specifically it was revealed that inflation negatively influences Ugandas economic
growth. Earlier on, the study began by testing for unit root using the two common tests for
stationary ADF and PP unit root tests before generating an error correction model.
5.2 Policy Recommendations
Basing on the findings of the study, I recommend that the government of Uganda should find
alternative sources of funding since foreign aid has no significant contribution on Ugandas
economic growth. This can be achieved through improving on local revenue generation from the
taxes either through tax reforms, discovering new tax bases, increasing tax rates, suspending tax
rebates, holidays and exemptions thus increasing on the locally generated revenues
The government of Uganda should also strive hard to maintain economic stability in the country
by controlling the rate of inflation in the country. Controlling inflation rates will in turn attract
increased investments from both within and outside thus leading to increased employment
opportunities thus accelerating the rat of economic growth.
5.3 Areas for future research
This study investigated the contribution of foreign aid on economic growth in Uganda from 2006
to 2012 using a single equation error correction model but it was no all exhaustive. The study
variables examined in this study are not the only determinants of Ugandas economic growth.
Research about other determinants of Ugandas economic growth such as the structural rigidities,
political atmosphere, openness, financial development, infrastructural development, agriculture,
industrialization, Variations in world Oil prices, discovery of oil deposits and many others is very
important also. Research can also be carried out on the relationship between economic growth
and government revenue, economic growth and government expenditure, economic growth and
government deficit among others. Other areas of the study could include examining the impact of
economic liberalization on Ugandas economic growth and the impact of East African
Community on Ugandas economic growth.