IMPACT OF FISCAL DISCIPLINE ON PLATEAU STATE GOVERNMENT EXPENDITURE

Abstract

The main objective of the public sector as part of the macro-economy is the provision of necessary government services to the public in order to achieve macro-economic stabilisation. Fiscal discipline is the application of fiscal rules to achieve deficit reduction and long-term fiscal consolidation. The aim of the study was to examine the impact of fiscal discipline on Plateau state government expenditure and to determine, given the existence of fiscal discipline, if a significant relationship exists between state government expenditure and the following demographic and economic variables: disposable income, population density, inter-governmental revenue, retirement benefit expenditure, and capital expenditure. State government expenditure, if properly deployed, should lead to expansion of public goods and services and the attainment of economic growth and development. The study made use of secondary data which were collected from Plateau State Ministry of Finance and the National Population Commission Jos. The data were analysed using the linear ordinary least square regression analysis. The result shows that state government expenditure has a significant positive relationship with disposable income, intergovernmental revenue and retirement benefit expenditure, a significant negative relationship with population density and capital expenditure. It was concluded that (i) state government expenditure is not geared towards the expansion of public goods and services that will enhance growth and development (ii) economies of scale in the production and provision of government services is yet to be attained and (iii) state government expenditure is incurred in order to implement possible fiscal discipline mechanisms of balanced-budget or deficit reduction. The study recommends that fiscal discipline mechanisms should be implemented only to the extent that the decision does not constrain expenditure on public goods and services that may result in growth and development