- World Bank in its latest classification downgrades SL to a lower middle-income country
- SL was elevated to an upper-middle income country only last year
- Wold Bank says latest classification doesn’t reflect COVID-19 impact
- Economists see silver lining with possible access to concessional funding and further extension of GSP Plus
The World Bank (WB) has downgraded Sri Lanka from an upper-middle-income country to a lower middle-income one as the country’s Gross National Income (GNI) per capita slipped below upper-middle income country threshold of US$ 4,046.
The downgrade comes after the country was elevated to the upper middle-income country status one year ago when its GNI per capita income reached US$ 4,060 crossing WB’s upper middle-income country income threshold.
However, Sri Lanka’s GNI per capita income fell to US$ 4, 020 at the end of 2019 and consequently, the WB reclassified the economy as a lower middle-income country under WB’s 2020-2021country classification by income level.
Sri Lanka is among the 10 countries that are moving to different income groups and also among the three countries that are moving to a lower group from the 2019 classification.
Accordingly, under the new classification, Benin, Indonesia, Mauritius, Nauru, Romania, Nepal and Tanzania are moving to an upper income group while Algeria and Sudan along with Sri Lanka are moving to a lower income group.
The WB noted that Sri Lanka along with Algeria, Indonesia, Mauritius, Nepal and Romania were “very close” to the respective thresholds last year.
Meanwhile, several economists pointed out that there could be a silver lining attached to the reclassification of the country’s per capita income group particularly with regard to access to concessional funding and possible delay of expiration of European Union’s GSP Plus concession extended to the country’s exports.
EU’s GSP Plus concession was scheduled to expire in 2023 with Sri Lanka’s graduation to the upper middle-income status last year.
With Nepal’s graduation to lower middle-income country group this year, all South Asian nations except Afghanistan now belong to either lower middle-income group or high income group.
As WB’s income classifications are based on 2019 GNI per capita data, it emphasised that this year’s classification doesn’t reflect the impact of COVID-19.