The World Bank has changed Sri Lanka’s classification from a lower-middle income country to an upper-middle income country under its latest country income classifications for the 2020 fiscal year.
The World Bank classifies the world’s economies into four income groups — high, upper-middle, lower-middle, and low. They base this assignment on Gross National Income (GNI) per capita (current US$) calculated using the Atlas method. The classification is updated each year on 1 July.
Accordingly, Sri Lanka inched into the upper-middle income category along with $4,060 per capita income for 2019 along with Kosovo ($4,230 per capita) and Georgia ($4,130 per capita). Argentina was downgraded from a high income country to upper-middle income with a per capita of $12,370. Zimbabwe moved to the lower-middle income category from low income after posting a per capita of $1,790.
The classification of countries is determined by two factors. A country’s GNI per capita, which can change with economic growth, inflation, exchange rates, and population. Revisions to national accounts methods and data can also influence GNI per capita. Secondly classification thresholds that are adjusted for inflation annually.
Until last year (fiscal year 2019), the income classifications had an analytical purpose and did not influence the World Bank’s lending terms, the World Bank said in a blog post. However, since the last fiscal year, the high-income threshold is also a determining factor for lending rates. Surcharges are applied for lending rates of countries which have been categorised as high income for two consecutive years.
New thresholds are determined at the start of the World Bank’s fiscal year in July and remain fixed for 12 months regardless of subsequent revisions to estimates. Under the latest classifications per capita income of less than $1,025 per annum are classified as low income, between $1,026-$3,995 lower-middle income, $3996-$12,375 upper-middle income and above $12,375 high income countries.
(FT)