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Paper short abstract:

Universal pension is scantly studied in developing countries. A non-contributory, basic pension was recently piloted by a non-state actor in north-west, Tanzania mainland. Our microsimulation study provides old-age pension upscaling implications based on poverty, income inequality and financing.

Paper long abstract:

Universal pension schemes are scantly covered in academic literature on African states. A non-contributory, basic pension was recently piloted by a non-state actor in north-west, Tanzania mainland. Since the scheme was limited in scope and not implemented by the state it is plausible to explore upscaling potentials. This simulation study considered two scenarios: first, the universal pension of 15,000 Tanzanian Shillings (TZS) to elders of 70 years and above is provided on monthly basis at the national level; and second, the earlier scenario is means-tested to include same elders but those who are below the food poverty line. Our static analysis based on 2022 system of tax-benefit microsimulation model for Tanzania (TAZMOD) derives associated implications on poverty, income inequality and government expenditure in terms of how the scheme(s) can be financed. Findings suggest that first and second scenario can reduce share of food and basic need poverty for poor population by 2.1% and 2.9%, respectively. For the same scenarios, share of food and basic need poverty for households with elders will be reduced by 10.2% and 15.7%, respectively. However, the government will be required to allocate around 295.78 (3% of total revenue) and 17.80 (0.18% of total revenue) billion TZS per annum to cover the expenditure for financing universal pension (scenario 1) and non-contributory, basic pension for elders under food poverty line (scenario 2), respectively. If specified pension will be provided national-wide to food poor elders, is feasible without too high cost with greater chance of reducing poverty gap.