Page 515 - 2016 - Vol. 40
P. 515

systems, public research spending and the provision of
basic education and medical services, raises the economic
potential of an economy. At least since the influential
studies of Schafer (1989) and De Haan and Romp (2007)
they argued that a rise in productive government activity
increases output. Easterly and Rebelo (1993) and, more
recently, Canning and Perini (2004) found evidence for
long-run growth effects associated with public investment
in infrastructure. In addition, many case studies highlight
the growth-enhancing potential associated with such
investments (OECD, 2007).

       The significant macroeconomic imbalance,
increasing unemployment, and mounting poverty led in
early 1990s to the adoption of adjustment than what the
IMF would dreamt, while real GDP has registered an
impressive growth rate of 10.22percent during (1990-
2002), and the economy has shown some signs of
recovery, poverty indicators have continued their upward
trend. Mounting political pressure on the government both
from internal and external- forces, together with the
escalation of civil war in the south have all led to a
reduction in foreign aid and to significant increase in the
resources devoted for the war. These developments have

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