“Analysis of Government Spending on Agriculture Sector and its Effects on Economic Growth in Rwanda”

Abstract

The purpose of this of this study is to investigate the effect of government spending on agriculture (GEA) sector and its contribution to Rwanda’s economic growth. Rwanda has achieved strong and sustained growth since 2000s, its economy has changed gradually over the past years and has expanded at an average annual growth rate of more than 7% and on average of 8.2%, from 2008 to 2012. Large agricultural output, although Agriculture contribution to GDP has declined, agriculture sector remains the core contributor of the economy, with one-third of the GDP, the production of food crops have been identified as one important contributing factor led to tremendous socio-economic achievements, in addition to robust exports and strong domestic demand. This study intends to analyze the effect of government expenditure on agriculture sector towards boosting economic growth. Using panel data analysis tools EViews for Rwanda country from 1997 to 2014 sourced from the Ministry of Finance and Economic Planning (MINECOFIN) and the National Institute of Statistic of Rwanda (NISR), a model and expanded equation was estimated seeking to quantify the effect of government expenditures for agricultural development and impact to GDP. The results indicated that government expenditure on agriculture sector has significant and positive effect where the results show that in the long run, government expenditures on agriculture explains GDP growth. Ordinary Least Squares, (OLS) estimates shown that the coefficient for Government Spending on Agriculture (GEA) was estimated that it is statistically significant. In sum, a 1 unit increase in government spending on agriculture was found associated with almost 3% effect (2.5%) increase in GDP.