Evaluating the Ad-Hoc Impact of Fiscal Policy and Governance Quality in Attracting the Official Development Assistance: A Testimonial From East African Countries

Abstract

Numerous studies have exclusively focused on foreign direct inflow attraction whereas the relative attraction of official development assistance (ODA) has relatively seldom been addressed, particularly in the context of spillover attraction in East Africa. In contrast to FDI, official development assistance, requires lesser complex frameworks for donors although the idiosyncrasy of philanthropic grants for developing nations such Africa is more unlikely without a cardinal governmental strategy. Accordingly, in this paper we examine how adequate fiscal policy in East Africa contributes to increase of official development assistance (I), we also addressee how governance quality facilitates the barrier for ODA inflow which in turn provides a decent inflow for recipient state. To provide empirical answers, the study employed panel cointegration test Ols test to explore the impact and relationship, similarly a granger causality test was used to observe future effect. According to the findings, fiscal policy manifested a negative long run association with official development assistance. Which brings the light how East Africa region are still stagnating in the sense of failing to implement adequate fiscal policy. This poor budget implications with a limited portfolio fails the assurance of providing a concise distribution at different public sectoral which in turns alters potential external aid. At the same time, the finding in this article also demonstrates that aid may have adverse fiscal policy-related repercussions that are not just harmful but also ineffectual. Channeling help to nations with "poor policies" does not solve the problem: funding consistently weakens positive policies that already exist while encouraging aid dependency. On the other hand, Governance factors positively attracts ODA spillover. This Panacea of Governmental quality for ODA materialization in the long-run can be attributed on how ODA is attracted toward nations with greater transparency level.