Amid the gloomy Pandemic mood, Africa was greeted by some good news.From July 1st, a handful of African states moved up the economic ladder in World Bank’s new classification.
The classification by World bank is considered as a report card of the economic performance of a country that defines the progress of a nation. The process is done by dividing Global economies into four income groups based on its Gross National Income(GNI) per capita. Countries in the low category have less than $1,036, lower-middle between $1,036 and $4,045 upper-middle between $4,046 to $12,535, and high-income countries in excess of $12,535 GNI Per capita. The classifications are reviewed every year on July 1.
In the revised classifications announced by World Bank, Tanzania and Benin were promoted to lower-middle-income status from low income group with their GNI per capita of US $1,080 and US$1,250 respectively. With a GNI Per capita at US$12,740, Mauritius was upgraded to high-income classification. Unfortunately, Sudan and Algeria slipped down the spectrum. Sudan fell from the lower-middle-income country category to the low-income category, while Algeria was categorized as a lower-middle-income country, from upper-middle income country in 2019.
The upgradation of Benin, Mauritius and particularly Tanzania, was greeted with great enthusiasm. Many economists hailed the July 1 declaration as a clear manifestation of the national development process of Tanzania reflecting improvement in poverty reduction. President Magufuli’s Development Vision had originally sought to make Tanzania a “semi-industrialized, middle-income economy” by 2025. The achievement much ahead of its target was globally applauded.
A significant benefit of higher rank on the list is the country can attract a better credit rating and incentivize foreign investment. At the same time, Middle income classification comes with some hidden cost. Though the statistical threshold can be easily achieved, the economy often takes longer to make the structural transformation to reach a more equitable society.
With ascendance to a higher income classification they stand to lose benefits such as preferential access to markets and capital. The poor in such countries may lose access to affordable medicines through exposure to higher prices and fewer donors resources.To overcome these setbacks, a country has to bridge the income inequality.
World Bank also cautions that many of these rankings will have to be revised next year in light of the sheer economic damage unleashed by the coronavirus pandemic.
The classification methodology also has some inherent drawbacks. This calculation mode brackets countries with wide income disparities together.As a result, a country with a per capita daily expenditure of $3 or per capita income of $1,095 annually will be in the same classification as one with an income of $4,045, which is the landmark for achieving upper middle income status.
Nevertheless, MIC classification marks the beginning of a new, demanding chapter in the development journey. Ultimately, one hopes that more African countries will sooner than later join these higher categoriesand bring a visible, tangible and sustainable improvement to the lives of their citizens.
