An investigation into how Government Revenue and Expenditure, Changes in Imports, and Total Investment, Impact the Gross Domestic Product (GDP) of Zambia

Abstract

The study was aimed at investigating the relationship of factors such as Government Revenue and Expenditure, Imports as well as Foreign Direct Investment have with Gross Domestic Product of Zambia. In trying to assess the impact of the predictive variables, secondary data was used as per IMF data on the country of Zambia, from 2012 to 2023. A multiple linear regression analysis was used to estimate the linear relationship between the independent variables and dependent variable. It was noted that indeed there exists a relationship between Revenue generated and the GDP. This relationship is quite significant. The economy of Zambia would grow by 1.5 for any 1 unit of revenue collected. At the same time, expenditure has a significant negative impact on growth with downward movement of 0.8 for every unit of spending. In addition, there exists a weak relationship between the Changes in Imports and GDP of 0.08 per unit change. The impact of investment was positive, though not very significant at 0.09. Owing to the significant positive impact that revenue collection has on the growth of the economy, policy makers should continue to look at means of broadening the tax base as well as consider carefully the tax relief measures. The key remains to ensure that revenue collection is equitable and optimal supported by strong institutional frameworks to avoid significant leakages. Running on a budget deficit will weigh down on growth given the impact that expenditure has on economic growth. This entails that the fiscal space should be supported largely by revenue generation and less of debt.

Keywords: Government Revenue, Expenditure, Total Investment

DOI: 10.7176/EJBM/17-2-03

Publication date: February 28^th 2025