On way to becoming a middle-income country�
by Syed Mohammad Shahadatul Islam
Recently, the World Bank (WB) has pronounced Bangladesh a success story as we have successfully come out of the least developed country (LDC) group.
The countries whose gross national income (GNI) per capita a measure of the average income, per person in the economy falls between US$1,046 and $4,125, are considered lower-middle income nations. Bangladesh Bureau of Statistics (BBS) states that the countrys GNI is $1,314, although WB figures show the income to be just above $1,095.
Whatever the true figure, we can safely assert that we have achieved the GNI threshold set by the global lender, which duly has placed Bangladesh in the lower-middle income country bracket. However, in order to be efficiently categorised as a middle income country, Bangladesh has to consistently maintain the status for the next six years.
So, whether or not we directly benefit from this achievement, I think we all need to work hard to maintain standards in the same way as we struggled to achieve this milestone.
Generally, the World Bank assesses countries as middle-income countries on the basis of three criteria GNI per capita, human development index and vulnerable economic indicators. Regrettably, we have qualified for this lower-middle income status only in terms of GNI, but achievement of the remaining two yardsticks is still a far cry from their optimum states. Thus, things such as the alleviation of extreme poverty, meeting certain environmental standards, economic vulnerability analysis, and the development of human resources need to be treated equally with great care.
Moreover, I think the solidity of GNI per capita the only thing that we have achieved so far is in question. If you ask people of different groups and professions in our country whether their overall earnings have increased significantly over the past couple of years, 80 percent of people will likely respond no. However, it is true that our GNI has increased significantly. So, what is the science behind this picture?
I think the famous 80-20 rule will come into play here to resolve this apparent discrepancy. Bangladesh is a perfect playground for the 80-20 rule. Here, 80 pc people have 20 pc of wealth, while the other 20 pc own the remaining 80 pc.
My conversation with some shopkeepers near my residence reveals that their incomes have not increased significantly, thus, providing justification for this rule. Moreover, the slight gains they realised have been robbed by the increase in the price of essentials. So, the real income of 80 pc people have not increased remarkably. Thus, it is clear that the other 20 pc has experienced a huge increase in their incomes, contributing greatly to the overall amount of GNI.
There is no reason, however, for considering this rise in wealth negatively, as long as the additional money earned by the wealthy is properly taxed and reinvested in the economy.
Thus, with the money earned from taxing, the government can minimise the budget deficit, which every year compels us to borrow money, causing inflation. Furthermore, reinvestment in new manufacturing sectors will provide more employment.
Even though Bangladesh has already been promoted to the lower-middle income squad, the country will still be treated as an LDC for the next five years. I agree with the experts who contend that it is good news for us, because such a status quo will allow us to get loans easily at low interest.
Every year, we need to borrow huge amounts from the international money market to meet budget deficits. The rate of interest at which we get such loans, especially from the International Development Association (IDA), is 0.75 percent and the principal amount is reimbursable within 39 years. But what if the global lenders stop treating us as an LDC? So, we need to be cautious.
However, some specialists may argue that the middle-income country status may boost our bargaining power in ensuring loans. That is ture. But then, we must pay a higher rate of interest.
We aim to become an upper-middle income country within the next six years. To achieve this goal, we are required to increase our GNI to $4,126. Primarily, this can be done if we can accelerate our growth rate, which is currently around 6 percent.
One way we can boost our growth rate is through more exports. Almost always, we see that the Taka is undervalued in the international money market. I think this undervaluation of our currency can help us to do well in exporting. Besides, we should make sure that all the money earned is spent in our own country.
However, as I mentioned earlier, a good GNI is just one of many important criteria considered by the World Bank while gauging a countrys ability to qualify for a certain benchmark. Other important measures may include human resource development index, good governance, political stability, promoting mass education and attracting foreign and local investments. Thus, merely increasing income should not be our primary objective. We should be wary of that.
Achieving upper-middle income status might seem very difficult for us, but it is not impossible, if we proceed systematically to achieve the goal.
