Arya News - The United Nations has granted Bangladesh a three-year preparatory period until November 24, 2029 to graduate from its least developed country (LDC) category – taking into account uncertainties surrounding global trade, and long-standing domestic vulnerabilities.
DHAKA – The United Nations General Assembly (UNGA) has granted Bangladesh and Nepal a three-year preparatory period before they graduate from the least developed country (LDC) category, following requests from their governments for more time to carry out major reforms in key sectors.
The decision came at the 81st UNGA session in New York after extensive discussions at 1.30am (Bangladesh time) today. The Bangladesh Nationalist Party-led government had sent a letter to the UN Committee for Development Policy (UNCDP) just two days after assuming power on February 19 this year.
In its resolution, the UN acknowledged the severity of the challenges facing Bangladesh amid heightened risks of uncertain magnitude arising from recent conflicts and associated disruptions in international energy and supply flows. It granted the country a three-year preparatory period until November 24, 2029, taking into account uncertainties surrounding global trade, the lingering effects of recent shocks and long-standing domestic vulnerabilities.
The UN also noted the UNCDP’s view that, although the current graduation framework does not recognise domestic political transitions as grounds for extending preparatory periods, the complexity and specific nature of Bangladesh’s recent political transition merit consideration. It noted that domestic factors exacerbate the impacts of external shocks and affect the government’s capacity to respond to them.
The resolution suggested that Bangladesh advance domestic reforms and continue implementing them during the extended preparatory period. It also called for the implementation of a national smooth transition strategy, with support from the UN system and in cooperation with bilateral, regional and multilateral development and trading partners. Bangladesh was asked to provide regular updates on implementation in its annual report to the CDP.
After receiving Bangladesh’s letter, the UNCDP formed a panel to assess the request at its 28th plenary session in February at the UN headquarters in New York. The UN Economic and Social Council (ECOSOC) later recommended that the UNGA discuss the matter further.
Bangladesh’s plea was widely discussed at the 81st UNGA session and was supported by the G-77 countries, while the European Union (EU) also backed the request, Commerce Minister Khandakar Abdul Muktadir said recently.
The three-year deferment will provide relief from the prospect of facing an average tariff of 12.50 percent on exports from Bangladesh. Local businesses had been pressing the government to delay graduation to allow more time for preparation and ensure a smooth transition. With the deferment, Bangladesh will enjoy duty-free market access to major export destinations until November 2029.
Currently, Bangladeshi merchandise exporters enjoy duty-free market access in 38 countries and trade blocs under the LDC category, while 73 percent of the country’s total exports benefit from LDC-specific preferences.
Bangladesh was scheduled to graduate this year after meeting all three criteria—per capita income, the human assets index (HAI) and the economic vulnerability index (EVI)—twice since 2018 under two triennial reviews by the UNCDP. The country had earlier received a two-year extension because of the Covid-19 pandemic.
In the 2024 triennial review, the GNI per capita threshold for LDCs was set at $1,307, while Bangladesh’s GNI per capita stood at $2,684, according to data from the UN Department of Economic and Social Affairs.
The HAI threshold for LDCs was set at 59.6, while Bangladesh scored 77.5. Similarly, the EVI threshold was set at 40.6, while Bangladesh scored 21.9.
Ground for deferment
Bangladesh remains poorly prepared for a smooth graduation. The country has signed trade agreements with only Japan and South Korea to retain duty-free market access in the post-LDC era, but neither deal has yet been enforced. A preferential trade agreement with Bhutan was signed in December 2020, while negotiations are underway with nearly a dozen trading partners to conclude trade agreements.
Private investment has weakened significantly, with capital machinery imports falling from $5.1 billion to $2.8 billion between 2019 and 2024, according to a UN report published in April this year. The job crisis has deepened, with nearly 1.9 million jobs lost between 2023 and 2024, disproportionately affecting women.
Financial sector fragility remains acute, with non-performing loans in banks surging to 35 percent. Fiscal space is extremely limited, with revenue at just 6.8 percent of Bangladesh’s gross domestic product (GDP), while interest payments consume 36 percent of tax revenue, pushing the country’s debt distress risk from low to moderate.
The UN report underscored a series of shocks Bangladesh has faced between 2017 and 2026. These include continued exposure to climate vulnerability; the Rohingya crisis; a prolonged macroeconomic downturn that predates the regime change; the fallout from Covid-19; the political transition; the Russia-Ukraine war; inflation; and balance-of-payments pressures.
The report said Bangladesh’s preparedness for the loss of trade-related international support measures remained weak, with nearly 75 percent of exports dependent on LDC-specific duty-free access. A recent UNCTAD report estimates that Bangladesh could lose more than $17.5 billion in annual export earnings after graduation.
Only limited mechanisms, such as the UK’s Developing Countries Trading Scheme and free trade agreements with Japan and South Korea, have been secured, although the latter agreements have yet to be enforced.
Preparedness for the EU market, Bangladesh’s largest export destination, remains the weakest link. Inadequate preparation for the post-LDC phase, including the lack of preferential EU market access for apparel, comes as the recently concluded EU-India and EU-Vietnam free trade agreements are set to intensify competitive pressure.
Bangladesh is also unprepared for the loss of World Trade Organization policy flexibilities, particularly those relating to export subsidies and obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights. These changes will require stronger intellectual property protection and enforcement capacity.
Domestic readiness to offset preference erosion through lower logistics costs, improved compliance, reliable energy supplies and export diversification remains inadequate. The report warns that, amid ongoing macroeconomic turmoil, Bangladesh’s vulnerabilities—including reliance on external support, a lack of diversification and exposure to shocks—could become more pronounced.
Bangladesh’s preparedness for post-LDC financing realities is poorly aligned with the scale of the challenge. Although concessional finance will not end abruptly, its terms are tightening and LDC-specific financing windows are shrinking. Global official development assistance is also under pressure, with Bangladesh graduating amid declining aid flows and tighter donor budgets.
Effective use of available finance is constrained by weak project management, poor revenue mobilisation, rising debt servicing and limited fiscal space. Coordination gaps and delayed preparation have hindered the strategic use of transition-related financing opportunities. Implementation of the Smooth Transition Strategy has also been slow and uneven, with limited private sector engagement, weak inter-ministerial coordination and unclear financing frameworks.
Although Bangladesh meets all the graduation criteria, the central challenge lies in managing the transition and sustaining development gains. As the largest LDC and the biggest beneficiary of international support measures, Bangladesh faces a uniquely complex transition. The process is unfolding amid political uncertainty and a prolonged economic crisis, placing decades of progress under strain, the report said.
The UN has repeatedly emphasised, including under the Doha Programme of Action, that graduation should not disrupt development, making a smooth transition essential. Bangladesh represents a critical test case for ensuring that graduation translates into sustainable progress, the report said.
Graduation criteria
At the second triennial review held by the UNCDP on February 22-26, 2021, Bangladesh received the final recommendation to graduate from the LDC category. The country had first met all three graduation criteria in March 2018.
According to the UN, an LDC needs to fulfil at least two criteria to qualify for graduation. Bangladesh is the only country to have met all three criteria so far. Once a country meets the LDC graduation criteria, it must maintain this performance through two successive triennial reviews by the UNCDP.
Bangladesh’s per capita GNI was $1,827 in 2019, well above the UN threshold of $1,222. In the HAI, Bangladesh scored 75.3, higher than the UN threshold of 66. On the EVI, Bangladesh scored 27.3, below the required threshold of 32.
For all LDCs, graduation brings a mixed set of new realities. Countries must prepare well and make special efforts to ensure that graduation delivers meaningful benefits.
Bangladesh alone utilises 67 percent of the benefits provided by other countries to all 44 LDCs, while 73 percent of its exports benefit from LDC-specific preferences.