The paper examines the interrelationships between public spending composition and Uganda's development goals including economic growth and poverty reduction. We utilize a dynamic CGE model to study these interrelationships. This paper demonstrates that public spending composition does indeed influence economic growth and poverty reduction. In particular, this study shows that improved public sector efficiency coupled with re-allocation of public expenditure away from the unproductive sectors such as public administration and security to the productive sectors including agriculture, energy, water and health leads to higher GDP growth rates and accelerates poverty reduction. Moreover, the rate of poverty is faster in rural households relative to the urban households. A major contribution of this paper is that investments in agriculture particularly with a view of promoting value addition and investing in complementary infrastructure including roads and affordable energy contributes to higher economic growth rates and also accelerates the rate of poverty reduction.


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