LDC graduation: Govt seeks 3-year deferral

The newly formed Bangladesh government has formally requested a three-year postponement of the country’s graduation from the Least Developed Countries (LDC) category, just one day after assuming office.

On Wednesday, Economic Relations Division (ERD) secretary Shahriar Kader Siddiky sent a letter to José Antonio Ocampo, chair of the Committee for Development Policy (CDP), a subsidiary body of the United Nations Economic and Social Council (ECOSOC).

The letter cited a range of domestic and international challenges and requested that the preparatory period for LDC graduation be extended until 24 November 2029.

Under the existing schedule, Bangladesh is due to graduate on 24 November this year. A third and final review process is currently under way.

Before leaving office, the interim government, responding to calls from leading business associations and several economists, had recommended exploring coordination with other graduating countries such as Nepal and Laos, with a view to seeking an extension until 2030. The final decision, however, was left to the elected government.

On Wednesday, after assuming charge at the Ministry of Commerce, Khandaker Abdul Muktadir told journalists that all necessary steps would be taken to delay graduation.

He said the ministry had begun work immediately and would coordinate swiftly with the ERD to move the process forward. The letter to the CDP chair was dispatched the same day.

In its letter, the government argued that an extension would provide essential policy space to stabilise the macroeconomy, consolidate ongoing reforms, and complete priority actions under the Smooth Transition Strategy (STS).

It also stated that the five-year preparatory period had been “seriously disrupted” by successive domestic and global crises.

Among global challenges cited were the lingering effects of the Covid-19 pandemic, a sluggish global recovery, the Russia–Ukraine war and ensuing volatility in energy and food markets, tightening global financial conditions, delays in trade recovery, instability in the Middle East, and rising uncertainty in the global trading system.

Domestic challenges included irregularities in the financial sector, the political transition following the 2024 mass uprising, and the unresolved repatriation of Rohingya refugees to Myanmar.

According to the government, these shocks have generated macroeconomic instability, including slower GDP growth, higher inflation, declining public and private investment, and a reduced tax-to-GDP ratio. Pressure on foreign exchange reserves has intensified, imports of capital machinery and raw materials have declined, and lower investment has constrained new job creation.

Governance and macroeconomic pressures have also posed serious challenges to the banking sector and capital markets. The resulting fragility in the financial system, the letter notes, has directly undermined poverty reduction efforts.

As a consequence, policy priorities shifted towards short-term stabilisation and crisis management, safeguarding macroeconomic stability, protecting livelihoods, ensuring food and energy security, and managing external payment pressures. This, the government argues, limited the financial, institutional and political space required for graduation-related reforms.

The letter also highlights growing uncertainty over post-LDC trade preferences.

Concerns include potential complications in securing GSP Plus status from the European union for the ready-made garments sector, possible reciprocal tariffs from the United States, changes in bilateral trade agreements, and new free trade agreements concluded by competitor countries. Meanwhile, export growth has recently shown signs of decline.

Bangladesh remains heavily dependent on the garments sector amid energy and infrastructure constraints. That is why the government cautioned that a sudden loss of trade preferences within a compressed timeframe could weaken competitiveness and slow development momentum.

While acknowledging progress in tariff modernisation, energy reform, export diversification and compliance infrastructure in the industrial sector, the letter states that repeated crises have delayed implementation relative to the original schedule.

The government urged the CDP to give due weight to the independent Graduation Readiness Assessment conducted by the Office of the UN High Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS).

That assessment concluded that successive crises and political instability had “seriously disrupted” the preparation period and raised concerns over whether graduation as early as November 2026 would align with the UN principle that graduation should not disrupt development progress.

It further indicated that Bangladesh could consider invoking crisis-response provisions under the Enhanced Monitoring Mechanism (EMM) to seek additional time.

The government warned that proceeding under the current timetable could pose significant risks to macroeconomic stability, exports, employment and poverty reduction. Potentially this could undermine the sustainable and irreversible nature of graduation.

The immediate past interim government had advised submitting the request before the CDP’s annual plenary session (24–27 February) and instructed Bangladesh’s Permanent Representative in New York to present the matter before 23 February.

Bangladesh was first listed as an LDC in 1975 and has benefited from preferential trade access and other support measures. The CDP recommends countries for graduation based on triennial reviews assessing three criteria: per capita gross national income (GNI), the Human Assets Index (HAI), and the Economic and Environmental Vulnerability Index (EVI).

A country must meet at least two of the three thresholds, or double the GNI benchmark, to qualify.

Bangladesh met all three criteria in both the 2018 and 2021 reviews. In 2021, its per capita GNI stood at US$1,827, HAI at 75.4, and EVI at 27. The GNI threshold at the time was US$1,306. By 2024, per capita GNI had risen to US$2,820.

Graduation was originally scheduled for 2024 but was postponed by two years due to the Covid-19 pandemic.

Solomon Islands successfully secured a three-year deferral in 2023, citing civil unrest and natural disasters. Similarly, the Maldives and Nepal experienced delays due to a tsunami and earthquake, respectively.

Speaking about the situation, Centre for Policy Dialogue (CPD) distinguished fellow Mustafizur Rahman told Prothom Alo, “Strictly in terms of the graduation criteria, there is little scope for postponement. However, economic and political challenges may be presented as mitigating factors. It must be argued that progress under the Smooth Transition Strategy has been insufficient to ensure sustainable graduation. The country has passed through a transitional political phase, from upheaval to national elections. Additional time may therefore be justified to secure a durable transition.”

He added that the government had acted wisely in submitting the application promptly. While the CDP will assess the request, the final decision will rest with the UN General Assembly, where member states will vote.

“The government must therefore begin diplomatic engagement immediately to secure support from friendly countries such as India, China and the European Union,” he stated.