Title: Beyond Subsistence: Modeling the Potential of Universal Basic Income to Reduce Poverty and Stimulate Inclusive Growth in Uganda
Authors: Ahumuza Audrey, Asiimwe Isaac Kazaara
Volume: 10
Issue: 1
Pages: 310-319
Publication Date: 2026/01/28
Abstract:
Background: Uganda's persistent poverty challenge, affecting approximately 20% of the population despite decades of economic growth, has prompted exploration of transformative social protection alternatives to conventional targeted interventions. Universal Basic Income (UBI), providing unconditional cash transfers to all citizens, has emerged in global development discourse as a potentially paradigm-shifting policy instrument capable of simultaneously addressing immediate poverty while catalyzing broader economic transformation.Objective: This study assessed the potential of Universal Basic Income to reduce poverty and stimulate inclusive economic growth in Uganda through comprehensive modeling and analysis of direct welfare impacts and broader economic multiplier effects across different implementation scenarios.Methods: The research employed a mixed-methods design integrating microsimulation analysis, computable general equilibrium (CGE) modeling, and fiscal sustainability assessments using data from the Uganda National Household Survey 2019/2020 (n=15,122 households, providing 80% statistical power to detect 2 percentage point poverty changes). Propensity score matching analyzed treatment effects from existing cash transfer programs, while difference-in-differences estimation identified causal impacts on human capital investment and enterprise creation. Monte Carlo simulations with 10,000 iterations assessed parameter sensitivity, and multiple regression models with district-clustered standard errors examined fiscal sustainability under seven alternative financing scenarios.Results: Microsimulation analysis revealed statistically significant poverty reductions across all scenarios (p<0.001), with the moderate UBI of UGX 50,000 monthly reducing national poverty incidence from 20.3% to 11.2% (44.8% relative reduction), poverty gap from 5.8% to 2.1%, and the Gini coefficient from 0.428 to 0.371. Rural populations and female-headed households experienced proportionally greater poverty reductions despite higher baseline rates. CGE modeling demonstrated substantial economic multiplier effects ranging from 1.74 to 1.91, with the moderate scenario increasing real GDP growth by 2.7 percentage points to 7.9%, household consumption by 21.4%, and small enterprise creation rates by 82% from 12.4% to 22.6%. Conclusion: Universal Basic Income demonstrated substantial potential as a transformative social protection instrument for Uganda, achieving statistically significant poverty reduction and generating positive economic multiplier effects through consumption-led growth, entrepreneurship stimulation, and human capital investment. The moderate implementation scenario emerged as optimally balancing poverty reduction effectiveness, economic growth stimulation, and fiscal sustainability. The evidence supported phased implementation beginning with poorest regions, progressive financing mechanisms, complementary investments in rural infrastructure and women's economic empowerment, and rigorous monitoring frameworks to ensure adaptive management and long-term sustainability.