Estimating income losses and consequences of the COVID-19 crisis in Uganda

Working paper State Effectiveness, State and COVID-19

The recent COVID-19 pandemic has come at an overwhelming cost to both developed and developing countries; Uganda is no exception. Despite having relatively few cases, the pandemic’s indirect effects arising from an economic contraction and global recession, as well as the direct effects through ill health and death, are likely to have a devastating impact on poverty levels and people’s livelihoods. This paper aims to forecast the distributional consequences of the crisis in terms of its effects on poverty and inequality, and to understand how certain policy responses to the crisis might help to offset those effects. Our findings indicate that the income losses from the crisis are severe, erasing poverty gains of the past 10 years, and reaching well beyond Kampala.

Using household-level information from the 2016/17 Uganda National Household survey, we explore four different transfer schemes that the government might use to offset the poverty consequences of the crisis: (i) a universal transfer to all households based on their adult equivalence size, but excluding households with income from employment in the public sector or a public sector pension; (ii) a transfer of the same size as in (i), but targeted to only those households that were poor before the crisis began; (iii) an expansion of the SAGE grant to all those 65 years old and older; and (iv) a labor-intensive public works program directed at the hardest hit urban areas.