What Would Happen to Poverty in Africa if Most Aid Were Delivered as Social Cash Transfers? A Case Study of Uganda

Jacob Ulrich, Susan Kavuma, Wilson Asiimwe, Bruno Yave

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This article explores the potentially game-changing idea of repurposing a major part of overseas development assistance (ODA) to fund the up-scaling of social cash transfers (SCTs) in Africa. The analysis contributes to the debate about how best to use global development aid by considering the idea of simply bypassing the aid industry and instead giving most funds directly to the poor. With Uganda as a case study, we use the UGAMOD microsimulation model to analyse the socio-economic impact of using a major part of the current aid envelope, which for 2017–2020 was on average 2.37 billion USD, to provide two types of SCTs, namely old-age pensions and child grants. The scenarios analysed include both universal and means-tested SCTs at different cost levels, ranging between 4 and 115 per cent of current annual ODA in Uganda. We demonstrate that allocating a major part of ODA to SCTs would, seen in isolation, lead to very considerable reductions in poverty. In one tested scenario, where most ODA is allocated for universal child support, it is predicted that about two-thirds of current poverty would be eliminated. Importantly, however, large-scale SCTs would also come with significant socio-economic allocation costs, as aid is shifted away from its current uses, much of which goes to the social sectors. We discuss what this may imply for government revenue generation and the timing of any potential scaling of SCTs. Lastly, we note that scaling of SCTs would have political economy implications, which would need to be better understood.

Original languageEnglish
JournalForum for Development Studies
VolumeLatest Articles
ISSN0803-9410
DOIs
Publication statusPublished - 2024

Keywords

  • Africa
  • aid policy
  • economic modelling
  • innovative aid
  • scaling of social cash transfers
  • social cash transfers
  • Uganda

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