OpED

Mr President is Uganda “Mido” income or Middle income?

David Mafabi is a veteran journalist

Early this year, President Yoweri Museveni told a National Resistance Movement party gathering that Uganda has already reached the middle income status.

The president who was speaking at the annual State of Nation Address and declared that Uganda had already hit the target because the economy will be 44 billion dollars in July compared to 1.5 billion dollars when NRM/NRA came into power in 1986.

Mr Museveni explained that by time the budget is read [13 June, 2022], the country’s economy will be standing at $ 45.7billion by the exchange rate method and at USD 131.6 billion by the Purchasing Power Parity (PPP) method.

He added that this means that the GDP per capita is now $1046 and that the entrance points for the lower middle-income status, is USD 1036but we have now passed that figure.

Although the National Development Plan II had targeted 2020 as the year for Uganda to attain this coveted position, they remained silent on the middle income economy and left the president to as usual start his gamble.

This declaration has stunned a number of people who have questioned the figures that the president presented and many people have taken to social media to cast doubt on the presidential figures especially coming at the time when commodity prices are shooting through the roof and the shilling is not doing well against the dollar.

Even when there were many people who were awash with excitement about the Middle Income Economy, there were also those like me who deliberately declined to be sent into excitement.

 

Why? Because we never understood whether our President meant the Middle Income Economy or Mido Income economy and whether he understood the Middle Income Economy [MCI].

 

Mr President the Bagisu have a saying that when wise men point at the moon, it is fools who see the finger, could it be that we are fools who never saw the moon but kept looking at your finger wondering whether you were talking about “Mido” income Economy.

 

Mr President let me ask you “Do you know that our economy is growing by half of its pre-Covid rate, with the global economic crisis that has pushed the prices of essential commodities hence diminishing the people’s purchasing power, with the shilling trailing the dollar”

 

So are you telling us that the economy defied these odds and moved up hence propelling the country into the Middle Income Economy?

 

It is true in the Ugandan situation that every day we face an epidemic of deception and many of us never tell lies but the Bagisu ancestors say lying is the work of petty spirits leaving the truth behind in the dirt.

 

According to President Museveni, the economy has grown 29 times since that time in size and that in July, the GDP Per capita will be about $ 980 which is very near to the Middle-Income status which is 1039 dollars.

 

When you ask Ugandan Economists how Uganda could have attained middle income status at a time when the economy is yet to recover fully from the devastating impact of Covid-19, many of them wonder what the president is talking about.

 

Mr President I want to state it that there is no way you can attain middle income status when people’s lives and livelihoods have deteriorated since the last presidential comment on the middle status due to the ongoing global crises that you alluded yourself to.

 

Mr President what magic did we use to summersault our way to the middle income at such a supersonic speed?

 

And it is World Bank that classifies and assigns the world’s economies to four income groups—low, lower-middle, upper-middle, and high-income countries and not you however good in economics you can be.

Note must be made that these classifications are updated each year on July 1 and are based on GNI per capita in current USD (using the Atlas method exchange rates) of the previous year.

 

According to the report, which based on the population estimates of 2016/17, 57percent of Ugandans belong to the middle class and this currently represents 25million people although majority of them are in the floating middle income.

 

The middle class dominated by the floating class which is highly vulnerable or susceptible to any economic shock, and can quickly descend into poverty and it is an unstable sub-group of the middle class that cannot be relied upon for attaining and sustaining the middle-income status, as well as economic growth and development.

 

Mr President, are you aware that evidence suggests that the quality of Uganda’s middle class is wanting, it is fragile and highly unstable?

 

When you look at the world’s Middle-Income Countries defined as lower-middle-income economies, they have a Gross National Income per capita between US$ 1,036 and US$ 4,045. [The gross national income is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product, plus factor incomes earned by foreign residents] is Uganda’s economy any near this to qualify for this classification by World Bank.

 

According to the World Bank, middle-income countries (MICs) are defined as economies with a gross national income (GNI) per capita between $1,036 and $12,535.1 MICs are one of the income categories that the World Bank uses to classify economies for operational and analytical purposes.

 

And Gross national income [GNI] is the value of all income (also called output or national output) produced by a country’s residents (both citizens and foreign residents) within its geographical borders, plus net receipts of income (wages, salary, and property income) from abroad. In short, GNI is a measure of all money, goods, services, and investments that come into or stay in the country.

 

Uganda’s GDP per capita hasn’t grown at the same pace with its overall GDP. While the economy has increased from $26bn to $37bn in the decade ending 2020, it’s the only country in East Africa whose GDP per capita has not grown in the past decade.

The country’s GDP per capita in 2020 was $817, slightly lower than the $819 of 2010, according to data from the World Bank; Rwanda’s GDP per capita has grown from $609 in 2010 to $797 in 2020, Kenya, which achieved lower middle income status in 2012, has doubled its GDP per capita in a decade and Tanzania also climbed to the lower middle income status ladder in 2020, following recognition by the World Bank.

The World Bank statistics show how Uganda’s economy has performed dismally is the tax to GDP ratio. Uganda has the lowest GDP to tax ratio – 12.9% (as of 2019) – in East Africa and that the country’s revenue authority has not met its target in the past couple of years and only one million Ugandans actively pay tax.

Yes, your government has a good policy in in­fra­struc­tural in­vest­ment that en­vi­sions that the in­vest­ments will stim­u­late eco­nomic growth and growth of other sec­tors such as man­u­fac­tur­ing, agri­cul­ture and in­dus­try but the in­vest­ments have failed to stimulate eco­nomic growth.

For in­stance high en­ergy costs man­i­fest them­selves in the cost of busi­ness mak­ing it harder for en­ter­prises to set up within the coun­try thereby re­strict­ing em­ploy­ment op­por­tu­ni­ties re­quired to a na­tion to get to mid­dle in­come sta­tus.

President my late Grand Mum taught me through this proverb; He that beats the drum for the mad man to dance is no better than the mad man himself. — Maybe you could get good lessons from this.

Yes, People danced with excitement when you spoke about Uganda reaching the middle Income status but do you know that for Uganda’s economy to rebound, it could take longer to become a Lower-Middle-Income Country.

The World Bank says that despite many interventions, 22% of Ugandans are still living below the poverty line, according to data released by Uganda Bureau of Statistics (UBOS) in June this year.

The statistics from the UBOS also suggest that Uganda failed to attain middle Income status in 2020 but the president today insists that Uganda has achieved this when the general welfare of the country seems to have regressed leaves many questions unanswered and makes the president’s declaration run contrary to the aspirations listed in his government’s documents.

The UBOS statistics further indicate that based on the new poverty line of $1.77 per person per day, the share of Ugandans living in poverty stood at 30.1 percent, representing 12.3 million poor persons in 2019/20 and this means the upper poverty line increases the number of poor persons by 4 million from that estimated using the existing poverty line of $1.0 of 8.3 million, which makes the Middle Income status unattainable.

According to the World Bank most of the nations in the lower-middle-income category, most of the biggest issues might be providing its citizens with essential services, such as water and electricity, health, Education etc which we have failed to provide for our Citizens.

And contrary to government target of having 30 per cent Ugandans have access to electricity, Ubos found that only, 19 percent Ugandans used grid electricity, the government’s target of having 90 percent Ugandans having access to safe drinking water, Ubos found that only 79 had access to improved sources of drinking water and this according to World Bank leaves Uganda many steps away from getting into a Middle Income Status.

President Museveni, your assertion of Uganda as a Middle Income Status is laughable because it makes everyone claim that Uganda has attained a middle-income status at a time when many Ugandans are just recovering from the vagaries of Covid-19 inspired lockdowns.

Mr President you have failed to realise that Uganda is a liberal economy where much wealth is concentrated in a few hands and your per capita income is not the best measure for inclusive growth for this country to be in Middle Income Status.

Although on paper the fu­ture looks bright for many Ugan­dans, with the discovery of oil pro­duc­tion with its production ex­pected to start in the next few years, the levels of poverty across the divide, the level of youth un­em­ploy­ment con­tin­ues to sky­rocket re­gard­less of the dif­fer­ent ini­tia­tives to curb it such as the youth liveli­hood pro­grams and in­creased gov­ern­ment in­vest­ment in hu­man cap­i­tal de­vel­op­ment this makes chances of advancing to Middle Income status far.

You ought to be aware that cor­rup­tion and in­ju­di­cious man­age­ment of the pub­lic in­vest­ment pro­jects has also in­creas­ingly reared its ugly head over the last cou­ple of years to the level that pro­cure­ment processes in­volved in the large projects been ques­tioned by the Au­di­tor gen­eral, other weak­nesses like poor pro­ject man­age­ment where con­tract dis­putes, poor qual­ity works, and poor pro­ject iden­ti­fi­ca­tion and in­cep­tion are all too com­mon making a move to the Middle income status impossible.

And I would like to add that the wide income inequality in Uganda blunts the impact of growth in GDP as most of the income belongs to a few people [see the gap between Scientists and Arts teachers in the national budget].

Mr President Government institutions such as NSSF, Bank of Uganda, Ubos are releasing figures that show how poverty stricken we are while you telling us we are a middle income; your assertions ought to tally up with government’s institutions.

By the way, even if the figures are indeed correct and that we are a middle income status, remember our debt is almost 50 percent of the GDP it means that half of the economy belongs to somebody else.

And Uganda, like most African coun­tries has po­ten­tial in spades, but the one thing we lack is ef­fi­ciency and ef­fi­cacy to the level that World Bank defines Uganda as a low-income country and among the poorest countries in the world.

It is true that heavy in­vest­ments in infrastructure pro­jects have been un­der­taken, the works and trans­port and en­ergy and min­eral de­vel­op­ment sec­tors have av­er­aged a com­bined to­tal of more than 30% of the na­tional bud­get over the last three years.

I know that these pub­lic in­vest­ment strate­gies if pru­dently man­aged have the po­ten­tial to trans­form the econ­omy to a certain degree but under the current circumstances it is wrong to believe that these will transform our country into Middle Income Status.

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