LDC graduation deadline may be extended on condition on reforms

The current government had requested a three-year extension to prepare for Bangladesh's graduation from the Least Developed Countries (LDC) list. This application has been taken into consideration by the United Nations Committee for Development Policy (CDP).

However, rather than granting a full three years, the CDP has favoured a shorter extension. To this end, the committee has urged the implementation of reforms across various sectors, including the financial and revenue sectors.

Following Bangladesh's application to delay graduation, the CDP prepared a crisis assessment report on the country. The report has already been published, highlighting issues concerning the extension of graduation and the necessary reforms.

Sources involved in the process indicate that the LDC graduation deadline could be extended by one to two years. However, to achieve this, Bangladesh must submit an action plan and implementation strategy regarding the reforms it intends to undertake to overcome the crisis and prepare for graduation.

Following various processes and multiple assessments over the past eight years, the UN had previously decided that Bangladesh would exit the LDC category on 24 November 2026.

Shortly after assuming state power, the BNP government applied to the UN CDP on 18 February to extend the LDC graduation preparation period by three years to 24 November 2029.

The application stated that due to multiple external and internal shocks over the past five years, the country was hindered from making effective preparations for graduation.

Subsequently, on 6 April, Prime Minister Tarique Rahman sought personal cooperation in a letter to the UN secretary-general regarding this matter.

The CDP has taken a positive stance regarding Bangladesh's request to extend the graduation preparation period. The Ministry of Finance shared this information in a press release on Tuesday night, stating that the CDP has maintained a positive stand on the request to extend the LDC graduation preparation period until 24 November 2029.

Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), a private research organisation in Bangladesh, is a member of the UN CDP. Speaking to Prothom Alo yesterday, he said, “The CDP’s recommendation presents an exceptional opportunity for Bangladesh.”

“To make proper use of this opportunity, it is imperative for the government to swiftly communicate its reform commitments and a monitorable implementation plan to the UN. This could play a positive role during consideration by United Nations Economic and Social Council (ECOSOC) and the UN General Assembly,” he added.

Debapriya Bhattacharya also said that these reforms should not merely be seen as socio-economic priorities but as political commitments. “The roadmap for the future of Bangladesh lies within this,” he noted.

The CDP's crisis assessment report on Bangladesh states that the country has surpassed the required thresholds across all three criteria for LDC graduation by a significant margin. There is very little risk of it falling below the designated thresholds in any index in the near or medium term. The latest international forecasts also confirm this.

However, conflicts in the Middle East, their impact on international energy and supply chains, global trade uncertainties, and long-standing domestic structural weaknesses have posed serious challenges for Bangladesh, it added.

According to the committee, the UN General Assembly's approval of the extension during the endorsement process will be commendable if Bangladesh makes significant progress in essential domestic reforms to address its persistent structural weaknesses during this period.

The CDP further emphasised that domestic reforms in Bangladesh are extremely crucial. These include stabilising the financial sector, rapidly increasing domestic resource mobilisation by boosting tax revenue, and prioritising expenditure that contributes to economic sustainability and transformation.

Without significant progress in such reforms, it remains unclear how extending the preparatory period would assist in a sustainable graduation and smooth transition. Therefore, extending the preparatory period should not be viewed as an excuse to delay reforms, added the CDP.

Considering all aspects, the CDP stated that a relatively shorter extension of the preparatory period might be more conducive to achieving a sustainable graduation.

The CDP, formed under the United Nations Economic and Social Council (ECOSOC), reviews and recommends which countries will graduate from the LDC category, how they will graduate, and whether their transition period should be extended.

In the report sent to ECOSOC last April, the CDP merely mentioned that Bangladesh had applied to defer its LDC graduation. However, in response to the application, CDP members held multiple rounds of meetings with Bangladeshi representatives. Subsequently, in May, the CDP prepared a crisis assessment report on Bangladesh.

The CDP has already forwarded this crisis assessment report to ECOSOC. An ECOSOC meeting is scheduled to take place later this month. In the meantime, Bangladesh must submit an action plan and implementation strategy to ECOSOC detailing its intended measures to overcome the crisis and prepare for graduation.

ECOSOC can then forward the matter to the United Nations General Assembly along with its own recommendations. Following this, the UN General Assembly can complete the approval process based on ECOSOC’s recommendations.

That is not all. Even if ECOSOC does not recommend extending the graduation timeline, Bangladesh can still choose to appeal directly to the UN General Assembly for an extension. The General Assembly would then make the final decision.

In that scenario, Bangladesh would require the support of influential nations capable of playing a significant role in the UN General Assembly, and it would need to present justifiable reasons.

An example can be cited in this regard- a few years ago, the African nation of Angola applied to defer its LDC graduation. Since all other procedural stages had concluded, the country appealed directly to the UN General Assembly.

Angola cited a sharp drop in oil prices, which had caused a decline across all its economic and social indicators. With the assistance of Portugal, they successfully secured an extension during the UN General Assembly session.

In light of the publication of the UN CDP's report and its positive stance, Finance Minister Amir Khasru Mahmud Chowdhury convened an emergency meeting yesterday, Wednesday morning.

The meeting was attended by Commerce Minister Khandakar Abdul Muktadir, State Minister for Planning Md Zonayed Abdur Rahim Saki (Zonayed Saki), Bangladesh Bank Governor Mostaqur Rahman, and Mustafizur Rahman, a distinguished fellow at the research organisation CPD, alongside representatives from various business organisations.

Discussions at the meeting centred on reforms across 25 sectors, including the financial and revenue sectors, export product diversification, intellectual property laws for the pharmaceutical industry, reducing domestic and foreign debt risks, cutting tax exemptions, strengthening good governance in public services, boosting cashless transactions, lowering port costs, and signing Free Trade Agreements (FTAs) with different countries.

The timeline for when each reform would be completed was also discussed there.

According to reliable sources within the meeting, a decision was taken to form a high-powered committee, led by the finance minister, to oversee the reform activities. This committee will meet monthly to review the progress of the reforms. Furthermore, letters will be sent to the relevant ministries, allowing them one week to submit their feedback regarding their respective agencies.

Reportedly, once the feedback from the ministries is received, the action plan and implementation strategy report on the reforms will be forwarded to the UN ECOSOC. An official who attended the meeting told Prothom Alo that the report on the reforms would be sent to ECOSOC within this month. The reform initiatives will be monitored on a ministry-by-ministry basis.

There are currently 44 Least Developed Countries (LDCs) in the world. LDCs are also a category of developing countries, comprising nations with comparatively lower levels of capacity and development.

Over the next five years, six countries are awaiting graduation from the LDC category. In addition to Bangladesh, Laos and Nepal are also scheduled to graduate from LDC status in 2026.

The first list of Least Developed Countries was established in 1971. Over the past five decades, a total of eight countries have graduated from the LDC category. They are Bhutan, Botswana, Cape Verde, Equatorial Guinea, the Maldives, Samoa, Vanuatu, and Sao Tome and Principe.

Triennial reviews of LDC member states are conducted every three years. Whether a country qualifies to graduate to developing nation status is determined based on three core indices: per capita income, human assets, as well as economic and environmental vulnerability.

The United Nations recommends graduation from the LDC category if a country meets the thresholds in any two of these three indices, or if its per capita income reaches double the required threshold.

Bangladesh was included in the LDC list in 1975. By virtue of its LDC status, the country has enjoyed various privileges, including duty-free access for its product exports. Bangladesh met all three criteria during the triennial reviews in both 2018 and 2021.

Consequently, in 2021, a final recommendation was made for Bangladesh to exit the LDC category in 2024. However, due to the Covid-19 pandemic, the preparatory period was extended by two years. A final decision regarding Bangladesh's request for a further extension will be taken at the United Nations General Assembly meeting this coming September.