What Bangladesh can learn from global LDC experiences

In the early 1990s, Botswana faced a paradox. On the verge of graduating from the UN's Least Developed Countries (LDC) category, the country confronted serious risks. Landlocked, and constrained by limited human capital and weak infrastructure, it was highly vulnerable to fiscal shocks. 

With over 80% of government revenue coming solely from diamond mining, any sudden drop in global diamond prices could have forced cuts in health, education, and infrastructure—just as graduation would remove the safety net of concessional loans and preferential trade. 

Botswana's leadership recognised the risks and acted decisively. They managed diamond revenues prudently, invested in education, health, and infrastructure, and established a sovereign wealth fund to buffer against price fluctuations. 

These measures helped the country not only survive its 1994 graduation but also emerge as one of Africa's most stable and prosperous economies. At the time of graduation, Botswana's GDP per capita was around $2,931; as of 2024, it stands at approximately $7,695.2, according to data by World Bank.  

Botswana's story offers a clear lesson for Bangladesh, set to graduate in 2026: graduation is not just a milestone to celebrate, but the beginning of a more challenging phase that demands planning, economic diversification, and stronger institutions to handle the loss of trade preferences and concessional support. 

As a subsequent fallout, graduating countries lose duty-free market access, concessional loans, and special international support. For Bangladesh, heavily reliant on ready-made garments (RMG) and remittances with currently a per capita GDP of $2,593, it is high time to take note of this and map out plans accordingly taking into account lessons from the countries that have already overcome similar hiccups. 

Some countries, among the eight countries graduated so far, provide complementary lessons for Bangladesh.  

Cabo Verde, a small Atlantic island state that graduated in 2007 with a GDP per capita of approximately $3,134, faced the challenge of minimal natural resources and vulnerability to external shocks. Its path to sustainable growth lay in services—tourism, aviation, and financial services—and in mobilising its diaspora to send remittances and investments home. 

Crucially, it anticipated the sudden loss of LDC benefits by working with donors to design "transition finance" mechanisms, gradually tapering aid and concessional support. As of 2024, Cabo Verde's GDP per capita stands at $5,272.9 (according to World Bank Open Data).  

Small island states like Samoa and the Maldives highlight the critical role of strong institutions. 

Samoa, graduating in 2014 with a GDP per capita of approximately $3,983, developed a comprehensive "smooth transition strategy," integrating economic stabilisation, development planning, and coordinated donor support. As of 2024, its per capita GDP is around $4,898.8.  

Meanwhile, the Maldives, which graduated in 2011 with a GDP per capita of about $8,600, faced rising borrowing costs and exposure to climate vulnerabilities. Policymakers focused on reforming revenue collection, strengthening fiscal discipline, and protecting social spending. As of 2024, the Maldives' GDP per capita has grown to roughly $13,215.5. 

These cases are proof that graduation is not merely about income thresholds; robust institutions are key to managing shocks, maintaining development momentum, and safeguarding social welfare. 

Bhutan, which graduated in 2023 with a GDP per capita of approximately $3,481, adds another perspective. The Himalayan kingdom emphasised human development, institutional capacity, and sustainable growth through hydropower and carefully managed public finances. 

By aligning policy, fiscal management, and social welfare programmes before graduation, Bhutan ensured that the loss of LDC support did not destabilise its economy. For Bangladesh, Bhutan reinforces the lesson that deliberate planning and investment in long-term national assets—both human and natural—can turn graduation into a launchpad rather than a cliff edge. 

Not all graduations have been smooth, though. 

Equatorial Guinea, which graduated in 2017 with a GDP per capita of approximately $7,809, relied heavily on oil revenues. While income levels met UN thresholds, human development and economic diversification lagged. When oil prices dropped, the country's economy faltered, exposing persistent poverty and inequality. Its per capita GDP, as of 2024, is approximately $6,745.4, illustrating the risks of growth concentrated in a narrow sector without parallel investment in human capital or institutions. 

Bangladesh, still dependent on garments, must diversify its economy and strengthen resilience before graduation. The global experience highlights key imperatives. Investing in human capital—education, skills, and healthcare—is essential to move workers into higher-value manufacturing and services as trade preferences wane. 

Economic diversification and regional integration are also crucial, with sectors like pharmaceuticals, ICT, agro-processing, and green industries offering new growth avenues. Fiscal prudence and the creation of buffers, exemplified by Botswana's sovereign fund, can safeguard stability, while proactive negotiation of transition support, as Cabo Verde showed, can ease the shift from concessional aid to commercial financing.