Has Museveni’s Uganda reached middle-income status?

By Musinguzi Blanshe
Posted on Thursday, 7 July 2022 09:42

Uganda's President Yoweri Museveni arrives at the UK-Africa Investment Summit in London, UK 20 January 2020. REUTERS/Henry Nicholls

On 7 June, during the state of the nation address, Museveni announced that Uganda has achieved middle income status, with GDP per capita at $1046 at the end of the 2021/22 financial year – exceeding the World Bank threshold by just one dollar.

In 2016, Ramadan Ggoobi, permanent secretary minister of finance – the most high-ranking technocrat in the ministry – presented a paper to senior government officials, arguing that for Uganda to meet middle income status, the country’s GDP growth rate would need to double.

“GDP must grow at a rate not less than 10% in the next four years. Secondly, we must find ways to reduce the fertility rate of Ugandans,” he said.

Between 2016 and 2019, Uganda’s GDP growth averaged 6% and then slumped to 2.9% in 2020 due to the pandemic. The World Bank projects that the country will return to pre-pandemic growth rate in 2024.

Nevertheless, Ggoobi, like Museveni, now also believes that Uganda has reached middle-income status.

Even so, given a lack of clarity around the calculations and little data on per capita income for previous years, there has been some speculation as to whether Uganda has met the target. In fact, the World Bank puts GDP per capita in Uganda currently at $840 and both the World Bank and the IMF believe that the country may need up to 12 years to achieve this milestone.

Calculating middle income

Last year, IMF Uganda country representative Izabela Karpowicz said: “If Uganda continues to grow at 6% going forward, in the medium term as before Covid-19 and with stable inflation and exchange rate, we think that lower middle-income status would be achieved sometimes by 2033 or 2034.”

Last week, World Bank officials in Kampala explained that the institution’s per capita income calculations are based on GNI per capita rather than GDP, which is used by government officials. “We take GDP and adjust it to get net income, and that is one of the main differences between GDP per capita and GNI per capita,” said Rachel Sebudde, a senior economist at the World Bank country office in Uganda.

Whereas GNI per capita captures inflow earned by nationals working in foreign countries and outflows earned by citizens of a country working in another, GDP per capita is simply GDP divided by the national population. It’s the reason why some economists believe GNI per capita is a better indicator of per capita income.

Uganda’s GNI and GDP per capita grew fast in the 2000s, but stagnated and then decreased in the 2010s. For instance, in 2011, GDP per capita was $823 while GNI per capita was $850, according to World Bank statistics. As of 2021, GNI is $840 while GDP is $858.

Uganda must work harder to achieve middle income and may be boosted by oil production and if population growth slows down

In the decade that Uganda’s figures stagnated, the GDP as well as GNI of its neighbours, such as Kenya and Tanzania, increased fast. The World Bank has declared both of them lower middle-income countries – Kenya in 2014 and Tanzania in 2020.

The World Bank also factors inflation, Uganda shilling exchange rate and population growth rate in its calculation. At 3.2% in 2021, Uganda had the third highest population growth rate in Africa after Niger and Equatorial Guinea. High population growth can affect GDP per capita negatively.

Uganda must work harder to achieve middle income, the World Bank says, and may be boosted by oil production, which is expected to start in 2025, and if population growth slows down. Any negative shocks that limit growth to an average of 5%, however, may mean that middle income would be achieved after 2031, the World Bank says.

Government pushback

Moses Kaggwa, director of economic affairs at the ministry of finance, tells The Africa Report that the variance in terms of figures between government and World Bank could be due to different reporting periods as well as quality control measures by international institutions.

On Monday, officials from the government and those from Uganda’s World Bank country office met to discuss the variance.

Chris Mukiza, executive director of the Uganda Bureau of Statistics (UBOS) on Wednesday said they found out that the World Bank was using a wrong population projection. According to him, the World Bank used 47.1 million people for its calculations, yet [the] government projection is 42.4 million. “They are [including] people we don’t have,” he said.

Mukiza berated journalists for quoting World Bank and IMF figures instead of those compiled by the government. “We have gone to the same schools [as them], better schools even, but because you hear about the World Bank, IMF, you [ignore stats from] UBOS.”

If the World Bank had used the government’s population projection, Mukiza said, the per capita income variance wouldn’t be of “statistical significance”.

You don’t [know] with certainty what has happened in this current year that is ending… They are still estimates

As Sebudde said, there is a difference because the World Bank waits for official figures, which are released by Uganda’s statistics agency at the end of the financial year. “You don’t [know] with certainty what has happened in this current year that is ending… They are still estimates,” she said.

Apart from high population growth rate, economists argue that a large proportion of Uganda’s GDP is produced by foreigners. For instance, the country’s fastest growing sectors — telecommunications, banking, large-scale manufacturing – are dominated by foreign institutions, meaning that a lot of money is repatriated out of Uganda.

Using growth figures of these foreign companies to portray income of Ugandan citizens is misleading, says Prof. Waswa Balunywa, the principal of Makerere University Business School. “If big companies like beer, soda, telecommunication are increasing their growth, once you divide that growth with the total population, it will give you a wrong figure.”

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