Tanzania: Middle Income Status Opens New Realities for Tanzania

Tanzanian President John Magufuli. There is cause for Tanzania to celebrate after becoming the second country in East Africa to be declared a lower middle-income country (MIC) by the World Bank. PHOTO | FILE | AFP 

editorial

Economic growth and development are universal aspirations that define the progress of both the

individual and the collective as a State. There is cause, therefore, for Tanzania to celebrate after becoming the second country in East Africa, after Kenya, to be declared a lower middle-income country (MIC) by the World Bank.

The July 1 declaration is a clear manifestation of economic progress in Tanzania. The World Bank relies on income thresholds consistently achieved over a specific period and how that translates into individual wealth to make a declaration such as the one it did on Wednesday.

Yet it might not be time for Dar es Salaam to throw caution to the wind, because middle income classification comes with some hidden penalties.

From preferential access to markets to the cost of essential medicines and capital, a country faces a tall order if its ascendance to a higher income classification is not matched by meaningful change to the average man's wallet.

A country is considered Lower Middle Income when its per capita income rises above the World Bank's international poverty-line daily expenditure of $1.25 to at least $2.86 per day or $1,035 annually. The problem with this methodology is its tendency to lump together countries with wide income disparities together.

Hence, a country with a per capita daily expenditure of $3 or per capita income of $1,095 annually will be in the classification as one with an income of $4,045, which is the threshold for achieving upper middle income status.

While a country could easily achieve that statistical milestone, the economy often takes longer to make the structural transformation to a more equitable society. The poor in such countries may lose access to affordable medicines through exposure to higher prices and fewer donors resources.

The World Bank argues that its income classification should not be a basis for funding decisions by multilateral agencies.

On the contrary, however, the assumption often is that a MIC country is wealthy and can therefore afford to pay more for the goods and services it consumes. Some examples are pertinent. Atripla, a branded version of a commonly prescribed first line HIV treatment regimen, is accessible to Low Income Countries at a base price of $613 per patient per year. Middle Income Countries get it at $1,033 per patient per year. Such prices are clearly beyond the affordability of many MICs.

That is not to say that Tanzania will suffer such a fate, and the classification, which boosts a country's creditworthiness, deserves every pop of the champagne bottle in celebration. Such facts are merely a cautionary tale that should remind us that MIC classification marks the beginning of a new, demanding chapter in the development journey.

Ultimately, one hopes that Tanzania will one day again celebrate not just numbers but a visible, tangible and sustainable improvement in the lives of its citizens.