​​​​​​​With middle income status:Let’s prepare for hard tradebargainin

06Jul 2020
The Guardian
​​​​​​​With middle income status:Let’s prepare for hard tradebargainin

​​​​​​​EUPHORIA has lately gripped high government circles and portions of the media, upon the country’s elevation to official middle income status even if it is at the lower end of it, ridding the country of the tiresome tag of a ‘least developed’ state.

In cultural terms this sort of transition is like graduating to adulthood, where one starts being tasked with responsibilities that were earlier being conducted by parents or guardians. That means the shift isn’t just a moment of chest thumping but also of foreboding.

Despite our constant wish for middle income status, there is no doubt that plenty in how we are used to conduct business with foreign countries has to do with our usual status of a least developed country. That means there were areas we took for granted that they will understand our position, for instance in the issue of trade reciprocation as different from shepherding countries to be lifted from abject poverty. When a country attains middle income status, economic relations with foreign countries shift from lifting it from poverty by using aid. It starts negotiating appropriate bilateral trade ties, based on rules of mutual benefit.

We have already seen a bit of this even before Tanzania was reclassified as a middle income country, in the manner in which the government changed its relationship with major mining companies. Earlier, bad habits of poor countries dominated where there are contracts with foreign companies but the weak state of an underdeveloped country can’t enforce such contracts or agreements, as its officials don’t cost much for foreign companies to get their bidding. When the country finally had a government that can stand up to such inadequacies, this signaled that the weak state of the past and its tag of dependency was a past issue.

It can thus be said that the reclassification was in the air before statistical updates of various World Bank development preoccupations finally put the matter to the clear light of day. But this enhanced status also implied that there will be much less of the sort of indulgence that used to characterize our relations with foreign countries, and especially the major trade partners. It is as if in the past we used to be given various allowances to push forward the development process, and much of this will now be reconsidered. A state in abject poverty, without aid, is likely to continue slumbering, but a middle income opens its economy.

For instance there is a crisis gripping the East African Community in its lack of having prepared annual budget estimates, which has been linked to disturbed flows in foreign trade, tourism and project aid in the wake of the novel coronavirus outbreak. With this reclassification, the EAC budgeting issue may remain problematic but for a different reason, that aid-based programmes will find fewer takers. Development partners have to redo their budgetary arithmetic with huge resources being directed to fighting Covid-19. They could conceivably take relief in this reclassification to cut back on aid we hitherto took for granted.

More significantly, the terms are likely to change, for instance the World Bank alters a few terms in the sort of financing it extends to Tanzania. Instead of the International Development Association (IDA) window, we may be shifted a bit rapidly to the International Bank for Reconstruction and Development (IBRD), the main part of the World Bank. The difference lies in its far less concessional lending format.

Top Stories