The Impact of Government Expenditure on Economic Growth in Myanmar: A Fiscal Decentralization Perspective

Abstract

May Zin Phyu and Dilgasa Bedada Gonfa

This study's main goal is to investigate how government spending affects Myanmar's economic growth, with an emphasis on fiscal decentralization and local governments' financial capabilities. Utilizing panel data collected spanning fifteen Myanmar regional states between 2000 and 2021, the study first used a fixed effects model before using quantile regression to confirm the findings' robustness. Secondary records supplied by the Budget Department and the Department of the Ministry of Planning and Finance served as the source of the data. The study's findings indicate that while labor and net exports have a negative impact on Myanmar's economic growth, financial decentralization, government spending, both decentralization and centralization, foreign direct investment, and the general populace all significantly and positively contribute to economic growth. Nonetheless, there is a statistically significant positive interaction between fiscal decentralization and government spending that results in economic growth. Government expenditure, decentralization for economic growth, and recommendations all play a major role in developing policies aimed at reducing poverty. This area has demonstrated its effectiveness in reducing poverty in Myanmar's regional states by providing aid to low-income or employed individuals who lack access to financial resources. Finally, by advancing understanding of regional supervisory skills beyond certifications, the government may use local expenditures as well as fiscal decentralization to improve development competitiveness, thus promoting regional autonomy and revolutionizing national economies.

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