The objective of this paper is to analyze the impact of government spending on economicrngrowth in Ethiopia. Since the link between government spending and economic growth isrncomplex, both analytical (qualitative) explanations and econometric analysis are used inrnthe study. The descriptive and qualitative analysis of the study investigates that thernlimited revenue buoyancy, unreliable source of financing, imprudent fiscal policyrn(particularly in the dreg regime) and capacity deficiency have limited the role ofrngovernment expenditure, as fiscal instrument, in stimulating economic growth.rnAlthough the rate of growth of expenditure as a ratio of CDP has been increasingrnconsistently over time, its absolute per capita magnitude is too low, even compared tornSub-Saharan African countries. Thus, there is a need to increase government expenditurernand to effectively and efficiently utilizing it in a way it induce faster economic growth.rnThe need for increasing government expenditure is also evident in an effort towardsrnachieving the Millennium Development Coals (MDGs). This calls for, in general, nonrndestortionary and reliable source of revenue, capacity building, and restrainingrnexpenditure that can be efficiently provided by private sector.rnIn the econometric analysis efficiently has been made to see the impact of various componentsrnof government spending (investment, consumption and human capital expenditures) onrnthe growth of real CDP for the period 1960/61-2003/04 using Johansson MaximumrnLikelihood Estimation procedure. It is found that only expenditure on human capital havernlong-run significant positive impact. Investment (productive) government spendingrndisplays a negative but insignificant impact on growth of real CDP, which again revealsrnthe inefficiency and poor quality nature of public investment. In the short run, allrncomponents of government expenditure do not have significant meaning in explainingrneconomic growth.