Does Spending Efficiency Moderate the Relationship Between Government Expenditure and Economic Growth In the EAC Region?

Abstract

expenditure and economic growth in East African Community (EAC) countries from 1970 to 2022. The study adopted a correlational research design and employed a two-stage methodology: Data Envelopment Analysis (DEA) was used to generate SE scores, which were then incorporated into a fixed-effects panel regression model. The findings reveal that while GE has a positive and significant effect on EG, this relationship is strengthened in contexts where SE is higher. The results confirm that efficient allocation and utilization of public resources enhances the impact of government spending on growth, supporting Keynesian and endogenous growth theories. This moderating role of SE highlights the importance of fiscal quality, not just the amount of spending, in promoting economic growth. The study recommends institutional reforms focused on improving expenditure effectiveness through better governance, targeted social investments, and ongoing performance monitoring. Further, the study suggests that EAC governments strengthen public financial management systems, improve allocative efficiency, and institutionalize SE monitoring frameworks. Such reforms would not only amplify the growth dividends of public spending but also support ongoing regional integration and sustainable development goals. These insights contribute to both fiscal policy formulation and broader discussions on sustainable development in emerging regions.

Keywords:       Spending Efficiency, Government Expenditure, Economic Growth, East African Community, Panel Data, DEA, Public Finance