What middle income economy status means for Tanzania

Tanzania aimed at attaining middle income status by the year 2025. On  July 1, 2020, the World Bank graduated the country from low to lower-middle income status.

This new income status has been among the major news and issues of discussion. It is very important to understand the various implications for a country like Tanzania to attain this status that came five years earlier than the targeted date of 2025. This piece highlights what middle income economy status implies for Tanzania.

Middle from where?

Before graduating to the new income status, Tanzania belonged to low income group of countries. This is a group of countries whose annual Gross National Income (GNI) per capita by 2015 was no more than $1,025.

GNI is the total monetary value of goods and services that a country produces both domestically and abroad. When this total is divided by a country’s total population, one gets GNI per capita. This is the average income of each citizen in the country. Statistically there are outliers by way of incomes that are very much higher and lower than this average.

 Recently, there have been over 30 countries in this group. They include Afghanistan, Burundi, Congo, Ethiopia, Liberia, Malawi, Mozambique, Nepal, Somalia, Zimbabwe and Uganda.

Two middle income groups

 Having attained the middle income status economy, Tanzanians should understand that there are two major sub-groups in this income category.

The middle income economies group of countries, as is the case for all other income groups, is not a homogeneous but a heterogeneous category.

 The countries falling in this set are diverse in many aspects including in income. One of such sub-groups is low middle income group of countries.

The other one is high middle income sub-group. Documents and talks in Tanzania have tended to be general on attaining middle income status without specifying in which of the two sub-groups the country was aiming at.

Logically it has to be the low middle income status because that is the next level after the low income status that Tanzania belonged to before the July, 2020 graduation. Low middle income This income status is for countries whose annual GNI per capita is between $1,026 and $3,995.

Recently, there have been about 51 countries in this group. These include India, Ghana, Indonesia, Morocco, Sudan, Pakistan, Bangladesh, Kosovo, Lesotho, Egypt, Kenya, Nigeria, Zambia and Syria. Therefore, this is the league of countries that Tanzania has joined. Not a permanent position As is the case with the other income groups, this is a fluid and dynamic - not static - group. Countries may enter in and out of this group. This depends on many economic variables and magnitude affecting GNI per capita. They include factors that affect production of goods and services in all sectors and their monetary value as well as factors affecting the population size.

If GNI and population size remain the same then a country remains in this group. If GNI decreases as population remains stagnant or increases by some points then a country may sink back into low income status. If GNI increases faster than population growth, a country may graduate to high middle income economy.

 Selected implications

Broadly speaking, the new income status for Tanzania implies improved standards of life by way of higher quantity and quality of goods and services consumed, better quantity and quality of social services such as health, education and water, lower mortality and morbidity rates, higher literacy rates, lower poverty levels and more quantity and quality of economic infrastructure.

It implies that the country will no longer qualify for some interventions targeted to low income countries including some grants and loan categories such as concessional ones.

It may also not qualify for some debt reliefs. On a more positive note, it is a good score where rating the country for some loans as well as in attracting and retaining investments.

 High middle income

 Having attained low middle income status, the next level is graduating to high middle income status.

This is a club with annual GNI per capita of between $3,996 and $12,475. There are about 55 countries in this group.

 They include Algeria, Angola, Botswana, Brazil, China, Iran, Jamaica, Namibia, Russia, South Africa, Cuba, Libya, Iraq and Turkey. The next level will be high income status with annual GNI per capita of $12,476 and above like USA, UK and France.

The author is Associate Professor of Economics at Mzumbe University and Principal of Mzumbe University Dar es Salaam [email protected], +255 754 653 740