Unpacking middle income economy concept for Tanzania

Tanzania envisages becoming the middle income economy by 2025 and this is almost everyday’s talk. It is especially so now in the context of industrialisation as the means of attaining that the middle income status. Essentially, there are various strategies through which a country can attain middle or other income status. This time around Tanzania has chosen industrialisation.

It is very important, therefore, to first understand the concept of middle income to be able to align industrialisation efforts accordingly. This article is an attempt to highlight some of the basic issues for a Tanzanian type economy to migrate to middle income status.

Income groups

The World Bank (WB) groups countries in various categories, including in diverse income groups for various purposes. Among the income groups include the middle income group of countries. Among the main economic goals for Tanzania is attaining the middle income economy status. This is documented in several places, including in the country’s Vision 2025 under the strong and competitive economy gal. It is very possible that many Tanzanians do not understand some of the key issues in attaining the middle income status.

Where is Tanzania now?

The talk about moving to the middle income status as a country necessarily raises the question on which income status is Tanzania now? According to the World Bank, the country is in the low income status group of countries. This is a group of countries, whose annual Gross National Income (GNI) per capita by 2015 was $1,025 (about Sh2,194,000 by July 2016 exchange rate) or below. There are about 31 countries in this group of countries. They include Tanzania, Afghanistan, Burundi, Congo, Ethiopia, Liberia, Malawi, Mozambique, Nepal, Somalia, Zimbabwe, Uganda etc. Needless to say the annual GNI per capita is an average. Statistically, there are outliers by way of incomes that are very much higher and lower than this average. This is true in Tanzania as is the case in other 30 low income countries.

Middle income sub-groups

In a bid to become a middle income economy, Tanzanians should understand that there are at least two major sub-groups in this income group. The middle income economy group of countries, as is the case for all other incomes groups, is not a homogeneous, but a heterogeneous category. The countries falling into 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 mainly by Tanzanian leaders have tended to be general on attaining the middle income status without specifying in which of the two sub-groups the country is 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 currently belongs to.

Low middle income

This income status is for countries, whose annual GNI per capita is between $1,026 (Sh2,195,640) and $4,035 (Sh8,634,900) going by the July 2016 exchange rate. There are about 51 countries in this income group. These include India, Ghana, Indonesia, Morocco, Sudan, Tunisia, Pakistani, Bangladesh, Kosovo, Lesotho, Egypt, Kenya, Nigeria, Zambia, Syria etc. Therefore in its bid to attain middle income status, Tanzania is aspiring to resemble these countries.

High middle income

Upon attainment of low middle income the next level for countries is migrating to the high middle income status. This is a club with annual GNI per capita of between $4,036 (Sh 8,637,040 ) and $12,475 (Sh26,696,500). There are about 55 countries in this group. They include Algeria, Angola, Botswana, Brazil, China, Iran, Jamaica, Namibia, Russia, South Africa, Cuba, Libya, Iraq, Turkey etc.

High income

The next level after attaining high middle income status is high income status. This is a club of rich countries, whose annual GNI per capita is $12,476 (Sh26,698,640) and above. This is equivalent to Sh 2,224,886 per month. There are about 79 countries in this income group. They include the USA, UK, France, Germany, Norway, The Netherlands, Belgium, Saudi Arabia, Oman, Japan, Kuwait, UAE, Canada, Australia etc. It will be a tall order for Tanzania to attain this status.

Attaining the middle income status

Tanzania’s bid to attain middle income status implies raising its GNI at the rate that is higher than population increase. This is because GNI per capita is total GNI divided by the total population. For a country, whose population is increasing like Tanzania, it is very important to increase the GNI and tame population increase. Increasing GNI implies having more production of goods and services and associated incomes.

Increasing production calls for increased investments. This calls for improved investment climate inter alia. Attaining middle income status goes hand in hand with broader development in a number of social, economic and technological variables. It is very important therefore for Tanzania as a whole to understand what it entails to attain middle income status and what next after attaining this status.