## PROPOSED NEW GROUPING IN WEO COUNTRY CLASSIFICATIONS: LOW INCOME DEVELOPING COUNTRIES ## Source details **Canonical URL:** [PROPOSED NEW GROUPING IN WEO COUNTRY CLASSIFICATIONS: LOW INCOME DEVELOPING COUNTRIES](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_060314.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_060314.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_060314.pdf.json) --- ### INTRODUCTION - Purpose: - Facilitate enhanced coverage of low income country issues in the Fund’s flagship products. - Serve as a standardized definition of the “low income country” universe in staff analytical work. - Use of the proposed definition in analytical work would be encouraged but not required. - Inclusion or exclusion from this category does not affect a country’s eligibility to access resources from the Poverty Reduction and Growth Trust (PRGT), nor treatment of countries using Fund facilities for PRGT-eligible countries. ### THE CURRENT FRAMEWORK - WEO classification counts: - 34 member countries designated as advanced countries. - 154 member countries labeled “Emerging Markets and Developing Economies” (EMDEs). - PRGT eligibility and issues: - Some 73 EMDEs are eligible for concessional financial assistance from the Fund via the PRGT. - PRGT-eligible countries are often viewed as synonymous with “Low Income Countries” (LICs). - Special treatment of small and/or vulnerable states in PRGT-eligibility implies: - (a) one fifth of the PRGT-eligible countries have income levels above (and often far above) the standard income level set for graduation from the PRGT. - (b) PRGT-eligible grouping includes a disproportionately large number of small states (defined in recent Fund analytical work as population < 1.5 million, excluding advanced countries and three high-income fuel exporters: Bahrain, Brunei Darussalam, and Equatorial Guinea). - Income graduation references: - Income level for graduation for non-small states: twice the IDA operational threshold (IDA-OT), which was $1,195 in 2011 (i.e., 2 * IDA-OT = $2,390). - For small states, the income graduation level is thrice the threshold. ### A PROPOSED NEW DEFINITION - New category: Low Income Developing Countries (LIDCs). - Core definition (60 countries): - Criteria: 1) were designated PRGT-eligible in the 2013 PRGT eligibility exercise; and 2) had a level of per capita Gross National Income (GNI) less than the PRGT income graduation level for non-small states (i.e., 2 * IDA-OT or $2,390). - Exception: Zimbabwe meets criterion 2 but is not PRGT-eligible because it has outstanding arrears to the PRGT; an exception is made for Zimbabwe in the PRGT eligibility criterion. - The latest PRGT eligibility review (in 2013) used GNI data from 2011; GNI is estimated by the World Bank using the Bank’s Atlas method. The IDA operational threshold was introduced in 1988 and is updated annually. - Rationale for the chosen income cutoff: - Starting point: choose initial cut-off income level for “low income” as 2 * IDA-OT ($2,390). - Merit: rooted in an important operational concept at the Fund and related to the IDA cut-off. - Alternative considered: World Bank’s LIC/LMIC cut-off of $1,025 (2011) seen as less attractive because it would place similar countries (e.g., Kenya versus Ghana and Zambia) in different categories for no compelling economic reason. - Note: Weaknesses in national account methodologies undermine reliability of estimated income differentials across a range of SSA countries around the LIC-LMIC threshold. - Treatment of countries above the cutoff: - Identified 23 countries with per capita GNI above the LIDC cutoff (2 * IDA-OT) but below the World Bank LMIC/UMIC threshold ($4,035 in 2011). - These 23 were broken into three subgroups for comparison: 1) PRGT-eligible countries. 2) Countries that had been, but no longer were, PRGT-eligible. 3) Others. - Selected development indicators used for comparison: poverty rate (share living on less than US$1.25/day in PPP at 2005 prices), life expectancy at birth, share of agriculture in GDP, share of agricultural employment in total employment, and domestic credit to the private sector relative to GDP (all from World Development Indicators; latest available year after 2002). - Empirical comparisons and findings: - The 16 non-PRGT eligible countries (subgroups 2 and 3) generally had development indicators closer to the EM control group than to LIDCs; exception: Angola’s high poverty rate and low life expectancy made it resemble LIDCs more than EMs. - The 7 PRGT-eligible countries in the above-cutoff set were all small states. Their development indicators were closer to the EM group than to LIDCs: - For these 7 countries: average life expectancy = 70 years; credit/GDP = 40 percent. - For the LIDC group: average life expectancy = 60 years; credit/GDP = 23 percent. - For the EM group: average life expectancy = 72 years; credit/GDP = 53 percent. - Decision on borderline cases: - Three countries met the income criterion but were not PRGT-eligible due to significant access to international financial markets: India, Pakistan, and the Philippines. They were excluded from LIDCs because they are typically viewed as emerging market economies by market analysts. - Angola was the one country whose income level exceeded the LIDC cutoff yet had important LIDC-like development characteristics (legacy of civil war; dominant role of oil producing a sharp dichotomy between income level and key development indicators). For simplicity, Angola was not included in LIDCs. - Membership review: - Membership of the LIDC grouping will be reexamined on a regular basis, based on the evolution of income levels and conclusions of PRGT-eligibility reviews. ### KEY STATISTICS AND FINDINGS - Counts and thresholds: - 60 countries defined as LIDCs under the two criteria above. - 73 PRGT-eligible countries in 2013 (the list excludes Georgia, which graduated from PRGT-eligibility in April 2014). - 34 advanced countries in WEO classification. - 154 EMDEs in WEO classification. - IDA operational threshold in 2011: $1,195. - Two times IDA-OT (LIDC cutoff): $2,390. - World Bank LMIC/UMIC threshold (2011): $4,035. - Comparative indicator examples: - LIDC group averages: life expectancy = 60 years; credit/GDP = 23 percent. - EM group averages: life expectancy = 72 years; credit/GDP = 53 percent. - 7 PRGT-eligible small states (above cutoff) averages: life expectancy = 70 years; credit/GDP = 40 percent. - Angola: poverty rate = 43 percent (LIDC group average = 40 percent); life expectancy = 51 years (LIDC group average = 60 years). ### TABLE 1 — Low Income Developing Countries (LIDCs) (60 countries) - Countries that were designated PRGT-eligible in the 2013 PRGT eligibility exercise; and had a level of per capita Gross National Income (GNI) less than the PRGT income graduation level for non-small states (i.e., 2 * IDA-OT or $2,390). 1 $2,340 Mongolia 2 $2,210 Bhutan 3 $2,200 Congo, Republic of 4 $2,150 Moldova 5 $2,060 Kiribati 6 $2,010 Honduras 7 $1,960 Bolivia 8 $1,540 Nicaragua 9 $1,500 Uzbekistan 10 $1,480 Papua New Guinea 11 $1,410 Ghana 12 $1,320 Sudan 13 $1,270 Vietnam 14 $1,260 Nigeria 15 $1,250 Lesotho 16 $1,240 São Tomé and Príncipe 17 $1,210 South Sudan 18 $1,180 Zambia 19 $1,140 Cameroon 20 $1,140 Côte d'Ivoire 21 $1,120 Solomon Islands 22 $1,110 Lao People's Democratic Republic 23 $1,110 Yemen, Republic of 24 $1,030 Djibouti 25 $1,030 Senegal 26 $980 Mauritania 27 $900 Kyrgyz Republic 28 $830 Comoros 29 $800 Cambodia 30 $800 Kenya 31 $780 Tajikistan 32 $770 Bangladesh 33 $770 Myanmar 34 $720 Benin 35 $700 Haiti 36 $690 Chad 37 $670 Mali 38 $620 Burkina Faso 39 $610 Nepal 40 $590 Zimbabwe 41 $570 Afghanistan 42 $570 Guinea-Bissau 43 $560 Rwanda 44 $540 Tanzania 45 $510 Gambia, The 46 $480 Central African Republic 47 $480 Sierra Leone 48 $470 Togo 49 $470 Uganda 50 $450 Mozambique 51 $420 Madagascar 52 $400 Guinea 53 $390 Eritrea 54 $380 Ethiopia 55 $370 Somalia 56 $360 Malawi 57 $330 Liberia 58 $330 Niger 59 $220 Burundi 60 $200 Congo, Democratic Republic of ### TABLE 2 — Selected IMF Member Countries Ranked from Highest to Lowest per Capita Income Level (selected excerpts and thresholds) - Two times IDA operational threshold: ***$2,390 - IDA operational threshold: ***$1,195 - Selected ranked entries (showing location relative to thresholds and some graduation years indicated in source): 1 $4,020 Tunisia 2 $3,970 Angola (2010) 3 $3,800 Tonga 4 $3,720 Fiji 5 $3,610 Cabo Verde 6 $3,530 Kosovo 7 $3,490 Armenia (2013) 8 $3,480 El Salvador 9 $3,340 Timor-Leste 10 $3,170 Paraguay 11 $3,150 Ukraine 12 $3,080 Micronesia, Federated States of 13 $3,050 Guyana 14 $2,970 Samoa 15 $2,940 Morocco 16 $2,930 Indonesia 17 $2,870 Vanuatu 18 $2,850 Georgia (2014) 19 $2,850 Guatemala 20 $2,830 Swaziland 21 $2,760 Egypt (2000) 22 $2,610 Syrian Arab Republic 23 $2,580 Sri Lanka (2010) 24 $2,340 Mongolia 25 $2,210 Bhutan 26 $2,200 Congo, Republic of 27 $2,200 Philippines (1995) 28 $2,150 Moldova 29 $2,060 Kiribati 30 $2,010 Honduras 31 $1,960 Bolivia 32 $1,540 Nicaragua 33 $1,500 Uzbekistan 34 $1,480 Papua New Guinea 35 $1,450 India (2010) 36 $1,410 Ghana 37 $1,320 Sudan 38 $1,270 Vietnam 39 $1,260 Nigeria 40 $1,250 Lesotho 41 $1,240 São Tomé and Príncipe 42 $1,210 South Sudan 43 $1,180 Zambia 44 $1,140 Cameroon 45 $1,140 Côte d'Ivoire 46 $1,120 Pakistan (2010) 47 $1,120 Solomon Islands 48 $1,110 Lao People's Democratic Republic 49 $1,110 Yemen, Republic of 50 $1,030 Djibouti 51 $1,030 Senegal 52 $980 Mauritania 53 $900 Kyrgyz Republic 54 $830 Comoros 55 $800 Cambodia 56 $800 Kenya 57 $780 Tajikistan 58 $770 Bangladesh 59 $770 Myanmar 60 $720 Benin 61 $700 Haiti 62 $690 Chad 63 $670 Mali 64 $620 Burkina Faso 65 $610 Nepal 66 $590 Zimbabwe 67 $570 Afghanistan 68 $570 Guinea-Bissau 69 $560 Rwanda 70 $540 Tanzania 71 $510 Gambia, The 72 $480 Central African Republic 73 $480 Sierra Leone 74 $470 Togo 75 $470 Uganda 76 $450 Mozambique 77 $420 Madagascar 78 $400 Guinea 79 $390 Eritrea 80 $380 Ethiopia 81 $370 Somalia 82 $360 Malawi 83 $330 Liberia 84 $330 Niger 85 $220 Burundi 86 $200 Congo, Democratic Republic of *Prepared by SPR in collaboration with RES; Approved By Siddharth Tiwari; June 3, 2014. Sources: World Development Indicators; and IMF staff estimates.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_060314.pdf_