The question of delaying Bangladesh's graduation from the list of Least Developed Countries (LDCs) has come up again immediately following the new government's assumption of office after the national elections. Last year, the business community strongly advocated for this request, expressing concerns about the country's preparedness for the post-LDC reality. Although the interim government initially favoured postponing the transition, it later decided not to follow that course. Currently, the Economic Relations Division has written to the Chair of the UN Committee for Development Policy (CDP) requesting an extension of the preparatory period for graduation until 24 November 2029.
Bangladesh has submitted its 2025 annual report to the CDP, stating that the country now meets all three criteria for LDC graduation. Despite various global and domestic shocks, the report mentions continued progress towards the goal of graduation in November 2026. Furthermore, progress in implementing the 'Smooth Transition Strategy'' amid economic challenges has been claimed.
The three criteria for graduation are gross national income per capita, the human asset index, and the economic vulnerability index. The new government’s major challenge now is to maintain the continuous progress of these indicators and prepare to address the potential trade and financial impacts after the transition.
The government's rationale for delaying graduation is that the COVID-19 pandemic, geopolitical conflicts, global financial instability, and domestic political tensions have slowed down preparations. This has pressured macroeconomic stability and hindered the implementation of desired reforms. Additionally, uncertainties in global trade have increased. The loss of LDC status would reduce tariff benefits, potentially weakening export competitiveness. The government believes that extending the graduation period slightly would facilitate organising reforms and restoring economic stability.
Countries within the UN's LDC category receive certain special benefits, including preferential access to developed countries' markets, special provisions under WTO rules, low-interest loans, and technical assistance. Graduation from LDC status is determined based on specific measurable criteria. A country needs to meet at least two out of three indices or significantly exceed the specified limit in one index over two consecutive reviews to qualify for graduation.
This process is overseen by the CDP under the UN Economic and Social Council, which reviews progress every three years and recommends graduation upon meeting criteria. After two consecutive positive reviews, the matter is approved by the Economic and Social Council and later finalised by the UN General Assembly. Typically, a country is given a three-year preparatory period after a graduation decision. During this time, LDC-related trade and financial benefits are gradually reduced, allowing the country to adjust to the new reality.
Deferring LDC graduation is not a common process, nor does it happen automatically based solely on a country's internal decision. If the CDP chooses, it may recommend deferral until the next triennial review. Alternatively, if a country formally raises concerns with the UN Secretary-General, the matter can be discussed by the Economic and Social Council or the General Assembly. In rare instances of severe economic disruption where a country falls below the specified limits, the graduation process can be suspended, and the nation continues to be considered an LDC until the criteria are again met.
Although not frequent, there are precedents for such deferrals. The Solomon Islands received a three-year extension in 2023 due to severe natural disasters and internal instability. Angola managed to extend time through diplomatic means when hit by global oil price shocks. Pacific island nations like Vanuatu and Kiribati have received deferred benefits multiple times due to environmental risks. The Maldives extended its timeline after the 2005 tsunami and eventually exited the LDC list in 2011. Myanmar gained time following political instability from the 2021 military coup. Nepal received similar considerations post the 2015 earthquake. In the context of the COVID-19 pandemic, Bangladesh and Nepal's graduation timelines were extended from 2024 to 2026.
There is one common feature among these examples. In each case, there was a significant and verifiable shock that clearly slowed the pace of development in the respective country. Thus, such deferrals have been authorised based not only on policy decisions but also in the context of severe economic, political, or environmental crises. The challenge for Bangladesh is different. Despite recent economic slowdowns and structural weaknesses, core indices are still above the UN-determined limits, making it difficult to present a strong argument for deferral based solely on statistical grounds.
Regardless of the application's outcome, preparation for the post-LDC reality is imperative. Graduation signifies recognition of economic progress but involves significant policy and institutional alignment. Preferential market access, low-interest finance, and special trade benefits will gradually diminish. Without sufficient preparation, there could be stress on exports, revenue stability, and employment. Therefore, instead of getting entangled in debates over classifications, greater emphasis should be placed on boosting productivity, diversifying exports, enhancing revenue collection, and increasing financial resilience.
Institutional and regulatory reforms are essential for sustainable and competitive growth. Increasing proficiency in trade negotiations to advance free trade agreements and preferential trade agreements is necessary. It's crucial to elevate the standards of product quality, quality control, and intellectual property protection to international levels. Enhancing the analytical capabilities of trade and investment-related organisations will help strategically adapt to global market changes.
With decreasing low-interest foreign funding, domestic resource mobilisation needs strengthening. Expanding the tax base, reducing unnecessary tax exemptions, and increasing tax compliance are essential. Regarding tariff structure reform, a balance between competitive pricing and revenue collection must be maintained. Simultaneously, ensuring transparency, curbing corruption, simplifying government procurement processes, and improving judicial efficiency will enhance investor confidence. Efficient debt management and adequate foreign exchange reserves will aid in tackling external shocks.
To diversify the economy, investments must increase in sectors beyond the ready-made garments industry, such as light engineering, agro-based processing industries, the pharmaceutical sector, and information technology services. Expanding skills development and technical training to meet the demands of emerging sectors is essential. Long-term goals should focus on advancing value-added production through research collaboration, technology adoption, and public-private partnerships.
Certain populations might face heightened risks during the post-graduation period. Therefore, robust social safety programmes, retraining, and employment support are essential. Continuous investments in health and education will help sustain human capital progress. Inclusive policies will ensure that graduation does not increase inequalities; instead, it should accelerate sustainable development.
Bangladesh is now at a crucial juncture. Future success will not rely solely on maintaining or losing LDC status. The real question lies in the extent to which strategic reforms are implemented, institutional capacities are strengthened, and collective commitment transforms this graduation into an opportunity for stable and inclusive growth.
#Fahmida Khatun is an economist and executive director, Center for Policy Dialogue (CPD)
*The views expressed are those of the author.
#This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.