OF MIDDLE INCOME AND MAKING IT COUNT

During his state of the nation address President Yoweri Museveni reported that Uganda had finally crossed into middle income nationstatus.

The president said that by the end of this month Uganda’s GDP per capita would be $1,048, more than ten dollars above the accepted level of $1,036 required for a nation to cross into middle income status. To be officially recognized he said we would have to keep the economy growing for at least another three years, he said.

As expected the chattering masses went into overdrive, complaining that the economy is doing badly and that they are not feeling their country’s new status in their pockets.

Their cynicism aside this is nevertheless an important landmark for our economy.

"We are on a development journey and the attainment of the middle income status is an important milestone. It’s like going to school, the attainment of the middle income status is like completing P7, it’s an important event, but in and of itself not very useful for a person, in terms of becoming a self-sufficient economic player. Friends and family will acknowledge the accomplishment but the celebration will be mooted and maybe restricted to your immediate family. Attaining middle income status, like passing PLE, is not an end in itself but nevertheless an important rite of passage.

In 1986 Uganda had a GDP per capita of $250 or about a quarter of what is reported now. The progress becomes even more impressive when you consider that during the same period the population has about tripled, in other words if we still had the population of 1986 our GDP per capita would be more than $3000 and we would be eying upper middle income status already.

In the aid community they are always clicking their tongues at our high population growth – 3.3 percent at last count, which means our population doubles every 25 years. They complain that our high population growth rate is putting the brakes on our development.

In more developed countries bringing population growth rates under control it has been shown, came after, reductions in maternal mortality, fertility rates, infant mortality, in that order and only then did we see population growth rates slow and even reverse.

These developments speak to improvements in the health care systems, which comes with huge sustained investment in the sector. 

For a country to do that, it needs to be generating revenues from taxing ever growing economic activity.

High population growth rates are only a symptom, a symptom of poverty. Solve the poverty question and population growth will be history.

Which is why I don’t pay much attention to GDP per capita. It is a useful indicator of progress or lack of thereof, but to my mind the better indicator is the UN’s Human Development Index (HDI). The HDI measures living standards of a population by looking at among other things life expectancy, education and purchasing power parity.

The HDI recognizes, to paraphrase the great teacher, man was not made for the economy but the economy was made for man. The benefits of the economy should accrue to all the citizens and not to a small well positioned few.

 In 2019 the last available figures, Uganda’s HDI was 0.544. The better a country, the nearer its HDI is towards one and further away from zero. Uganda was ranked 159 out 189 countries, which shows how much more work we have to do and partially why explains the middle income status is not more widely felt.

But we are not alone. Tanzania with a GDP of about $55b ranks below Uganda at 163, Ethiopia with an economy thrice the size of Uganda’s was ranked 173. On the flip side Mauritius with a GDP of under $20b is ranked 66^th with a HDI of 0.804.

Norway is at the top of the pile with a HDI of 0.957.

"A growing economy is a prerequisite for development as measured by the HDI. In Uganda we have hacked the economic growth equation, according to World Bank figures, the last time the Ugandan economy contracted instead of grew was in 1985, the challenge of course is to ensure that this growth is more equitably distributed...

It shouldn’t come as a surprise. Most of Uganda’s growth has come from services – retail trade, financial services, construction but also manufacturing, which are mainly found in urban areas. With an urban population of 22 percent it’s not surprising that the benefits have been concentrated among a relative few.

As a country we have to keep the economy growing, so that we can collect more revenues, which we can use to improve services and infrastructure, spreading opportunity more equitably. Middle income status is not to be snorted at, but we need to look to improving the living standards of everybody not just an urban few.