What does Tanzania’s move to lower-middle income status mean?

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What does Tanzania’s move to lower-middle income status mean?
David Stanley

On July 1, 2020, the World Bank announced that the Tanzanian economy had been upgraded from low to lower-middle income status. So, what does that mean? Below, we answer some of the most frequently asked questions about this global exercise and what it means for Tanzania.  

How does the World Bank define country income groups? The World Bank assigns the world’s economies to four income groups—low, lower-middle, upper-middle, and high-income countries. The classifications are updated each year on July 1 by the Bank’s Development Data Group using the gross national income (GNI) per capita in current US dollars of the previous year (2019 in this case) against thresholds adjusted annually for inflation. Thus, the GNI numbers that are used for this year’s classification do not yet reflect the impact of COVID-19. 

What has caused the change in classification for Tanzania? Tanzania’s GNI per capita increased from $1,020 in 2018 to $1,080 in 2019, which exceeds the 2019 threshold of $1,036 for lower-middle income status. Thus Tanzania is currently classified as a lower-middle income country. The upgrade for Tanzania is the product of the country’s strong economic performance of over 6% real gross domestic product (GDP) growth on average for the past decade. 

Has the country achieved the Tanzania Development Vision (TDV) 2025 goals early? Yes and no. Per capita income is the formal criteria for low- and middle-income countries (LMIC) classification, and Tanzania has now crossed the threshold for lower-middle income status. But this is only part of the picture. TDV 2025 is much broader, and envisions Tanzania as a middle-income country in 2025, characterized by high-quality livelihoods; peace, stability, and unity; good governance; a well-educated and learning society; and a competitive economy capable of sustainable growth and shared benefits. So increased GNI per capita is not enough. Investing in both human development and physical capital is key to achieving these broad goals and improving the quality of life for all Tanzanians. 

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What does Tanzania’s move to lower-middle income status mean?
David Stanley

What will it take to retain LMIC status? Income classifications are calculated by the World Bank annually, and Tanzania needs to sustain its income growth momentum to remain in LMIC status. The COVID-19 pandemic presents unprecedented challenges around the globe, and per capita income in many countries will decline in 2020. Tanzania is also facing challenges, as discussed in the recently released Tanzania Economic Update. Historically, there have been 23 cases in the past 10 years of countries slipping back from MIC status to low income, or from high-income status to MIC. This has occurred for a variety of reasons. Some are exogenous, such as natural disasters and conflicts, but a significant number are also due to macroeconomic instability from high reliance on natural resources (commodity price shocks) or weakened debt sustainability due to mismanagement of macroeconomic policies. Hence, continued prudence on macroeconomic management should be a priority for Tanzania even after reaching this milestone.  

Will Tanzania immediately lose access to concessional financing from the World Bank? No. While GNI per capita informs the decision on whether or not a country is eligible for International Development Association (IDA) financing - the World Bank’s concessional lending arm - it is not the only indicator. Other factors, such as a country’s macroeconomic prospects, creditworthiness, risk of debt distress, vulnerability to shocks, institutional constraints, and levels of poverty and social indicators are also used to establish a country’s eligibility for IDA financing.  

Where can I find the underlying data behind the per capita income calculations? The data used by the Development Data Group to calculate GNI per capita is publicly available. Data for GNI, GNI per capita, GDP, GDP PPP, and Population for 2019 are now available on the World Bank's Open Data Catalog.  

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William G. Battaile

Lead Country Economist and Program Leader

Join the Conversation

YONA NYERO RAPHAEL
July 24, 2020

KINDLY I WOULD LIKE TO EXTEND MY SINCERELY TO THE WOLD BANK FOR ITS RECOGNITION TO TANZANIA COUNTRY AFTER TANZANIA ENTERED INTO LOWER MIDDLE INCOME STATUS, AS A LOWER MIDDLE INCOME COUNTRY AMONG OTHERS. THANKS VERY MUCH.

Charles Mwesiga
July 24, 2020

Thank you for educating me about MIC

Severine Jonas
July 24, 2020

What Tanzania termed to lower middle economy by wb what causes

emanuel wilbroad
July 24, 2020

With relevant justification what are impact of Tanzania being in middle income in relation to Globalization?.

Agnes
July 28, 2020

What are the indicators of lower middle economy in daily lives of Tanzania citizens

Ramadhan jumanne
March 16, 2021

Why Tanzania has been promoted by the world Bank to be middle income status recently in July 2020?

PETER MAPUNDA
March 16, 2021

I congratulate Tanzanians and much respect to the government of Tanzania,Tanzania as attained middle income country in the rang of lower middle income so it needs to reach to upper middle incomes soon as possible but the case of nation loans burden is still a challenge so how Tanzanian government will reach soon while this burden is developing to erode the economy in one way

Rehema kimaro
March 16, 2021

Thanks for more clarification about MIC

Japhet Chelu
March 16, 2021

How middle economy of Tanzania affect more women than men

Japhet Chelu
March 16, 2021

What does mean when the country qualify to middle income, while majority life still remain hard?

Julius Daniel
March 16, 2021

Thank you very much for a well elaborated information about this great step forward for our country. I am very impressed with some phrases here sighting that though the country has entered a another class according to world bank ranking procedures but it reminds the government that this also has to prevail in the social life of many Tanzanians. Our government now has to focus on making projects that focus on improving the livelihood of each citizen. Tanzania's vision 2025, is much clear about the significance of individuals life that would define the country move to high ranks of the economy. And so our government will have to go much deeper into the lives of Tanzanians to this great relevance to the actual situation among the citizen.

Thank you

Godwin JR😎
March 16, 2021

Hasn’t the Lower-Middle Income status discouraged donor states and NGO’s from funding projects in Tanzania in one or another?? Because as we speak many are with drawing, could this attained status be one among the reasons? Thank you so much.

Naghenjwa Tendwa
March 16, 2021

Thank you for the knowledge but I would like to learn more...What could be the reasons for increase in GNI in Tanzania that led Tanzania to have a middle economy? How can we say that a country is in the middle economy while the living standard of the people is still low do these two collerate (living standard and middle economy)?

Magay Fredrick
March 16, 2021

It quite a good message which developing countries should learn from.

Juma Ngomuo
March 16, 2021

Thank you for updates

Egon
March 16, 2021

I would like to extend a lot of congratulations to the word bank management and also Tanzanian government .
According to the strategies set by the Tanzania government ,it is very soon that Tanzania will move again from LMIC to UMIC .

John Mireny
March 16, 2021

LMIC ascent clarifications are spot-on. Some concerns and nuanced arguments harboured earlier due to ignorance over LMIC-status have luckily been given medication. Though, complete recovery may take time to be realized!

JERLADI KANYONDWI
March 16, 2021

JERLADI KANYONDWI
Apprecition to the World Bank ranking Tanzania into LMIC but also am deeply crying because in Tanzania there is everything ,i mean resources are plenty,we have delayed much,we were supposed to be in HIC's

Zahrani
March 16, 2021

Thanks ,but I like your opinion again ,on the implications of Tanzania as a middle economy country to the agricultural sector

gerold komba
March 16, 2021

Indicators of lower income in Tanzania includes
1.free education
2.improvement of infrastructures e.g standard gauge
3.increase of investment.
E.g in industries

Yona Goodluck kingazi
March 16, 2021

What are the advantages of lower middle economy to Tanzania citizens (6 points)

Yona Goodluck kingazi
March 16, 2021

What are the things done by Tanzania goverment which help to move in low middle income status?