Uganda’s middle-income status: Are we there yet or not?

Uganda’s President Yoweri Museveni last week rejected recent World Bank data that reported that the country is still under the low-income category. In an economic update by World Bank released on 1st July 2022, the financial institution disputed the statement by President Museveni and by extension the Uganda National Bureau of Statistics (UBOS) that Uganda has already attained middle-income status.

The East African Nation had projected earlier to get into the middle-income status by 2017 but failed. A readjustment was made and the target pushed to 2020 which still failed understandably given the emergence of the Covid-19 global pandemic

According to the World Bank, Uganda’s Gross National Income (GNI) per person stood at about $840 (ugx 3.1 million) in FY2021, increasing marginally in the year thus, leaving the country well below the lower-middle income threshold of $1,045 (UGX 3.9 million) per person. The gap that Uganda has to cover to reach middle-income status is $205 (UGX 779,210).

There are two methods of measuring economic growth, one being Gross Domestic Product (GDP) and another being Gross Domestic Income (GNI). Simply put, GDP measures economic growth by an aggregate production of goods and services within an economy whereas GNI measures economic growth by an aggregate production of goods and services by nationals of that country.

The World Bank official yardstick for measuring income status of a country is GNI and yet Uganda stubbornly insists on using GDP. For a country to be declared lower middle-income status, it must have obtained a minimum per capita of $1,036 (UGX 3.93 million)  which means on average in Uganda, every citizen is able to earn about UGX 3.7 million annually. This is done by dividing the country’s GDP by the total population of the country.

These statistics are very laughable, and ever since the president declared Uganda as a middle-income nation, some Economists have come up to question the credibility of Uganda Bureau of Statistics (UBOS).

In an Interview with Moses Mulondo, an Economist and president Uganda Parliamentary Press Association, he commented that he was utterly surprised by the president’s declaration of the country attaining middle-income status.

He revealed that between the implementation of the National Development Plan II (NDP) and NDP 2(which came to an end in 2020), Uganda’s per capita income was oscillating between $600 (UGX 2.28 million) and $750 (UGX 2.85 million) in a period of about ten years. According to him, it is therefore very shocking that the president announced that Uganda’s per capita income was now at $1,046 (UGX 3.97 m illion) given the fact that the country had just come out of almost two years of Covid lockdown that gravely affected the economy.

For over ten years, the country’s per capita income was moving at snail speed and even the figures from the previous Financial Year showed that the per capita income was at only $850 (UGX 3.2 million).

Bear in mind that Uganda had one of the longest lockdowns in the world and reports showed that the country countries had lost a lot of revenue and scaled down on production. It is therefore impossible for a country whose economy was almost in recession and had been greatly hit by the gross effects of the lockdown to have jumped all of a sudden into middle-income status. Over 3 million Ugandans lost their jobs after Covid and the poverty rate shot up to 28% from 21.5%.

SecretsKnown sampled 9 African countries that have achieved upper middle-income status in a survey to establish each of their per-capita income as of 2020.

So even though we based on the presumption that Uganda is indeed a middle-income country with our per capita income of $1,046, if you compare Uganda to the 10 African countries listed above, we would be at the bottom of the list.

Uganda’s Vision 2040, which is just 18 years away targets to reach a per capita income of $9,000, and yet Seychelles by the year 2020 already had a per capita income of $22,000, more than double what Uganda expects in the year 2040. What does this say about the country’s policymakers and planners?

The country also recently rolled out the Parish Development model, another of the uncountable prior government interventions for wealth creation and income generation. The golden question is why would a middle-income country need poverty alleviation programs, after the majority of its citizens are above the poverty line, right?

Mushime Moses, an Economist, and Lawyer in an interview with SecretsKnown explained that government could be probably insisting that the country has attained middle-income status because they want to prove to the citizenry that they are working or, to demonstrate to financial institutions like IMF and the World Bank that the economy has grown for substantial loans.

If at all government is deliberate in attaining middle-income status, they have to seriously invest in mechanization of the agriculture sector since the country’s comparative advantage is in agriculture and 43% of East Africa’s arable land is in Uganda. If they however continue to prioritize and allocate resources to security, State House, and public administration with no radical reforms for exponential growth, we might not achieve middle-income status even in the next ten years.