THE EFFECT OF GOVERNMENT EXPENDITURE ON LIVESTOCK SECTOR DEVELOPMENT IN ETHIOPIAN

Abstract

Livestock play multiple critical role in the Ethiopian economy by providing food, input for crop production and soil fertility management, raw material for industry, cash income as well as in promoting saving, fuel, social functions, and employment. Despite of owning the largest livestock resources in the country. The sector not yet reached the desired stage of development due to several factors and constraints. The main objective of this study is to investigate the effect of livestock government expenditure on livestock development in Ethiopia using a time series data from 1980 – 2019, also the study identifies the contribution of sector to the economic development and expenditure adequacy. A secondary data collected from published and unpublished source of MoA, MoFAD, CST, NBE, and FAOSTAT used on the variables of livestock GDP share, government livestock expenditure, livestock export value, livestock population, livestock production index, animal health service coverage, change in cattle death rate and control variables (inflation and exchange rate). The long-run and the short-run interaction among the variables identified using Johansson cointegration and Vector Error Correction methods. The long-run analysis indicates that livestock expenditure, livestock population and production index have a significant positive impact on the development of the livestock sector at 1% significant level, while the control variables have negative effect. Also, change in cattle death rate has positive effect at 5% significant. The long-run elasticity of the government expenditure has 0.998% impact on the sectoral development. In short-run the current year sectoral development has negative 1.6% effect on next year development while current year expenditure has 1.7% positive impact. The descriptive analysis deployed to identify the adequacy of expenditure and its contribution on economic development and the result show that highly inadequate spending and tangible contribution to national economy. In general, the government spending shows the commitment of the government and its role to support the sector and the study identify that the livestock sector has significant importance on the economy but less government expenditure, that need improvement by expanding livestock related revenue collection and proper resource allocation with utilization.