Should Zimbabwe consider a universal basic income scheme?

The IMF is supporting the Government of Zimbabwe as it carries out painful reforms, which will see a contraction of the wage bill, a reduction in agricultural input subsidies, rationalization of support to loss-making parastatals/state-owned enterprises (SOEs) among other priorities. These reforms are needed – Zimbabwe spends more on civil servant emoluments (82 percent of revenue) than the average Sub-Saharan African country (49.5 percent of revenue). SOEs have, in the past, engaged in the practice of acquiring companies that have non-performing loans in their balance sheets – effectively transferring debts onto public accounts, worsening Zimbabwe’s fiscal position.

While the Zimbabwean authorities are working to get the fiscal affairs in order there is need for substantial donor support for social protection. This includes programming meant to ease the cost of living for the poor and to provide a safety net when households and individuals fall into hard times, as indeed they will as fiscal cuts take effect. The international community should be working with the government to introduce a Universal Basic Income (UBI), funded by donors. This UBI should primarily be targeted at urban dwellers as existing social protection schemes (a school feeding program, a cash transfer scheme, a primary and secondary school education subsidy program among others) are largely aimed at rural households. In the May 2019 Staff Report by the IMF, the government has promised to maintain the floor of social spending. But effort is needed to better target this spending.

UBI experiments are ongoing in other parts of the world. In Kenya, researchers at Innovations for Poverty Action (IPA) have partnered with GiveDirectly to evaluate the effects of universal basic income on a wide range of economic and social outcomes.

In March 2016, the government of Ontario, Canada introduced a three-year pilot basic income program. 4,000 people were provided with monthly benefits to lift them to at least 75 percent of the poverty line (Bergstein 2018). Following a tax credit model, the Ontario basic income pilot ensured that participants received up to $16,989 per year for a single person, less 50 percent of any earned income; $24,027 per year for a couple, less 50 percent of any earned income. People with a disability received up to $500 per month on top. The Ontario experiment began to be wound down from March 2019.

UBI, an idea whose time has come (again), should be pursued as a social protection strategy for Zimbabwe. There is at present a confluence of events that make it opportune to do so. Zimbabwe’s mobile payments system (Eco-cash) allows for direct distribution of universal cash transfers to millions. The advent of platforms like GiveDirectly in Kenya, which make use of M-PESA to send cash transfers to individuals means there is precedence for such an approach in Zimbabwe. The protracted pain that Zimbabweans are yet to endure requires bold action to ensure that the much needed macro-fiscal SMP program succeeds.

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[1] IMF (2001). Country Report No, 01/05