Dar will not become a “middle income country” in 2015, but will Tanzania?

Daily News fp 120615Dar closer to don middle-income country tag soon,” said the government-owned Daily News on the front page, citing the budget speech by Tanzania’s Minister of Finance, Saada Mkuya Salim.

Let’s leave aside the oddly phrased headline (including the implication that “Dar” is about to become a country).

Instead, is Tanzania really on track to soon become a middle-income country?

The Minister said GNI per capita in Tanzania in 2014 was 1,724,416/-, equivalent to US$1,066 (page 46-47).

“This means that Tanzania will be a middle-income country by the end of this year if growth will continue at the current rate.”

(Hii ina maana kwamba, Tanzania itakuwa ni nchi yenye kipato cha kati ifikapo mwisho wa mwaka huu ikiwa ukuaji huo utakuwa kama ilivyo hivi sasa.)

The World Bank’s latest cut-off point for middle-income classification is a per capita GNI of $1,045 in 2013. The line rises slightly each year – the figure for 2014 will be published next month.

There’s no question that Tanzania’s growth rates in recent years have been impressive: around 7% per year, well above the world and sub-Saharan African averages.

I suspect, however, that middle-income status will have to wait a little longer.

The exchange rate used in the figures given by the Minister is 1,617 shillings to the dollar. The current exchange rate is 2,202 and sliding fast. I’m not an economist, and the exact calculation is complicated, but it seems clear that using this rate would hit the USD GNI per capita figure hard*.

As such, unless the exchange rate rebounds, it’s going to be a few more years before Tanzania can claim the middle income tag.

Incidentally, Dar es Salaam alone would probably qualify already, but that’s not what the Daily News headline writer meant.

* If any economists think I am wrong, please explain in the comments below.