The question of delay in delisting Bangladesh from the list of least developed countries (LDCs) has resurfaced soon after the new government took office after the national elections. Last year, the business community strongly advocated for this request, expressing concern about the country’s preparedness for a post-LDC reality. Although the interim government was initially in favor of postponing the transition, it later decided not to follow that course. Currently, the Economic Relations Division has written to the Chairperson of the United Nations Development Policy Committee (CDP) requesting to extend the graduation preparation period till 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 setbacks, the report noted continued progress toward the goal of graduation in November 2026. Furthermore, progress has been claimed in implementing the ‘smooth transition strategy’ amid economic challenges.
The three criteria for graduation are gross national income per capita, human wealth index and economic vulnerability index. The major challenge for the new government now is to maintain the sustained progress on these indicators and prepare to deal with the potential trade and financial impacts after the transition.
The government’s rationale for delaying the graduation is that the COVID-19 pandemic, geopolitical conflicts, global financial instability and domestic political tensions have slowed preparations. This has put pressure on macroeconomic stability and hindered the implementation of desired reforms. Additionally, uncertainties in global trade have increased. Losing LDC status would reduce tariff benefits, potentially weakening export competitiveness. The government believes that slightly extending the graduation period will make it easier to organize reforms and restore economic stability.
Countries in the UN’s LDC category receive certain special benefits, including preferential access to developed country markets, special provisions under WTO rules, low-interest loans, and technical assistance. Graduation from LDC status is determined based on specific measurable criteria. To qualify for graduation a country must meet at least two of the three indices or significantly exceed the threshold specified in one index in two consecutive reviews.
The process is overseen by the CDP under the United Nations Economic and Social Council, which reviews progress every three years and recommends graduation if criteria are met. After two consecutive positive reviews, the case was approved by the Economic and Social Council and later finalized by the United Nations General Assembly. Typically, a country is given a three-year preparation period following the graduation decision. During this time, LDC-related trade and financial benefits gradually taper off, allowing the country to adjust to the new reality.
Postponing LDC graduation is not a common practice, nor does it happen automatically based solely on a country’s internal decision. If the CDP chooses, it may recommend a moratorium until the next triennial review. Alternatively, if a country formally expresses concerns to the UN Secretary-General, the matter may 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 threshold, the graduation process may be suspended, and the nation will continue to be considered an LDC until the criteria are met again.
Although it does not happen frequently, examples of such postponements do exist. Solomon Islands received a three-year extension to 2023 due to severe natural disasters and internal instability. Affected by global oil price shocks, Angola managed to extend the time through diplomatic means. Pacific island countries such as Vanuatu and Kiribati have received benefits that have at times been delayed due to environmental risks. Maldives extended its deadline after the 2005 tsunami and eventually dropped out of the LDC list in 2011. Myanmar bought time after political instability from the 2021 military coup. Nepal also received similar views after the 2015 earthquake. In the context of the COVID-19 pandemic, Bangladesh and Nepal’s graduation timelines were extended from 2024 to 2026.
These examples have one common feature. In each case, there was a significant and verifiable shock that markedly slowed the pace of development in the country concerned. Thus, such postponements have been authorized not only on the basis of policy decisions but also in the context of serious economic, political or environmental crises. The challenge is different for Bangladesh. Despite the recent economic slowdown and structural weaknesses, key indices are still above UN-set limits, making it difficult to present a strong argument for a moratorium on statistical grounds alone.
Regardless of the outcome of the application, preparation for the post-LDC reality is essential. Graduation symbolizes recognition of economic progress but also involves significant policy and institutional alignment. Preferential market access, low-interest finance and special trade benefits will gradually diminish. Without adequate preparation, exports, revenue sustainability and employment could be under pressure. Therefore, instead of engaging in debate on classification, more emphasis should be given on increasing productivity, diversifying exports, increasing revenue collection and enhancing financial flexibility.
Institutional and regulatory reforms are essential for sustainable and competitive growth. Increasing efficiency in trade negotiations is essential to pursuing free trade agreements and preferential trade agreements. It is important to raise the standards of product quality, quality control and intellectual property protection to international levels. Enhancing the analytical capabilities of trading and investment-related organizations will help them adapt strategically to global market changes.
With the decline in low-interest foreign funding, domestic resource mobilization needs to be strengthened. It is necessary to expand the tax base, reduce unnecessary tax exemptions and increase tax compliance. With regard to tariff structure reform, a balance should be maintained between competitive pricing and revenue collection. Along with this, ensuring transparency, curbing corruption, simplifying government procurement processes and improving judicial efficiency will increase investor confidence. Efficient debt management and adequate foreign exchange reserves will help deal with external shocks.
To diversify the economy, investment should be increased in sectors beyond the ready-made garment industry, such as light engineering, agro-based processing industries, pharmaceutical sector and information technology services. It is necessary to expand skill development and technical training to meet the demands of emerging sectors. Long-term goals should focus on advancing value-added production through research collaboration, technology adoption and public-private partnerships.
Some populations may face increased risks during the postnatal period. Therefore, strong social protection programs, retraining and employment assistance are necessary. Continued investment in health and education will help sustain human capital progress. Inclusive policies will ensure that graduation rates do not increase inequalities; Instead, it should accelerate sustainable development.
Bangladesh is now at a critical juncture. Future success will not depend solely on maintaining or losing LDC status. The real question is to what extent strategic reforms are implemented, institutional capacities are strengthened, and collective commitment turns this graduation into an opportunity for stable and inclusive growth.
#Fahmida Khatoon is an economist and executive director, Center for Policy Dialogue (CPD)
*The views expressed are the author’s own.
#This article, which was originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.