Foreign Aid, Debt, Tax Revenue and Government Spending in South Asia: A Panel Analysis

Rozina Akter

Assistant Director
Money and Banking Division, Research Department, Bangladesh Bank

Sakila Aziz Nila

Independent Researcher
Economics Discipline, Khulna University, BD

Khulna University Business Review – A Journal of Business Administration Discipline, Khulna University, BD
Volume 14, Number 1, January to December 2019, Pages 17-28
DOI: 10.35649/KUBR.2019.14.1.2
Published: May 2021
Published Online:
May 2021

Purpose: Over the years, tax revenue, foreign aid, and debt play a prominent role in finance the South Asian countries’ government spending. Thus, this paper aims to analyze the effects of foreign aid, debt, and tax revenue on government spending in South Asia.
Methodology: The study considers six south Asian countries over 25 years from 1990-2014. The panel data method is used to analyze the impact of explanatory variables on the dependent variable.
Findings: From the empirical analysis, it is found that foreign aid, tax revenue, and total debt have a positive impact on government spending. It indicates that when these variables increase, government spending also grows significantly. However, a higher interest rate ebbs the volume of receiving debt among the sampled countries.
Originality: Under this circumstance, this paper advocate that rational use of tax revenue may abate the aid dependency and debt burden in South Asian countries.