Bangladesh pushes ahead with LDC graduation despite rising calls for delay
In its Bangladesh Annual Country Report 2025, submitted to the UN Committee for Development Policy (UN-CDP) in November, the government reaffirmed that the country continues to meet all three criteria for LDC graduation.
Highlights:
- Government insists LDC graduation proceeds despite rising economic vulnerabilities
- Bangladesh meets all three UN criteria for LDC exit
- Businesses, experts urge delaying graduation; government rejects possible "humiliation."
- Economy recovering slowly after shocks, but structural weaknesses remain significant
- Debt risks, banking fragility, and US tariffs threaten smooth transition
- Experts say preparation gaps persist; postponement could still benefit Bangladesh
Despite mounting pressure from businesses, economists, and political parties to seek a deferral for Least Developed Country (LDC) exit, the interim government is moving ahead with the graduation next November, even though the latest country report cautions that Bangladesh's development journey remains exposed to significant vulnerabilities.
In its Bangladesh Annual Country Report 2025, submitted to the UN Committee for Development Policy (UN-CDP) in November, the government reaffirmed that the country continues to meet all three criteria for LDC graduation.
"Despite various challenges, Bangladesh maintains satisfactory scores in September 2025 in all three LDC graduation criteria," says the government.
The report paints a picture of an economy striving to move up the development ladder while battling a perfect storm of domestic upheavals and global disruptions – from the Ukraine war and Red Sea shipping crisis to last year's student uprising and the shock of reciprocal tariffs imposed by the United States.
Faced with these pressures, the government has shifted focus towards restoring macroeconomic stability and keeping the Sustainable Development Goals (SDGs) on track. But the report suggests that the scale of vulnerabilities is widening, not shrinking.
"Despite multiple shocks over the past four years, Bangladesh continues to meet all the graduation criteria, as reaffirmed by the 2025 UN-CDP Report. The country, therefore, remains on track to officially leave the LDC category on 24 November 2026, upon completion of the five-year preparatory period that began in 2021," reads the report.
Earlier, in response to the demands of businessmen, local experts, including UNCDP member and economist Debapriya Bhattacharya, advised the government by highlighting information about the postponement of LDC graduation by several countries, saying that if the chief adviser were to write a letter to the United Nations requesting the postponement of LDC graduation, it could be effective.
Apart from writing straight to UN-CDP or UN General Assembly for a deferment of graduation timeline, Bangladesh could also avail of a new window offered under the Enhanced Monitoring Mechanism (EMM) to explain its position if it really seeks to delay its LDC exit, Debapripya, distinguished fellow of the Centre for Policy Dialogue (CPD), had said in September amid growing demands from the business community for seeking a delay in LDC graduation so that they can prepare better.
He had suggested that if the country is really serious and feels there are "unanticipated" and "unmanageable" development which demands more time for preparation, that should be reflected in the country report.
However, the government seems not to be requesting a deferment.
The latest country report reaffirmed that Bangladesh met all the criteria – GNI per capita, human assets index and economic and environmental vulnerability index, though it also listed the major challenges and fragilities of the economy to move forward.
The government believes that, even if Bangladesh applies for the postponement of LDC graduation, since the country has already met the three criteria, it will not secure the consent of member states in the United Nations General Assembly to delay the process. Consequently, by applying for a postponement, Bangladesh does not wish to suffer unnecessary "humiliation."
Anisuzzaman Chowdhury, special assistant to the chief adviser responsible for overseeing LDC graduation matters, told TBS: "The businessmen are talking about postponement, and some political parties are also supporting it without understanding the issue. But when much weaker countries than us are having their LDC graduation, why would we apply for a postponement?"
Stating that "LDC graduation is a political decision of the government," he added, "Why would the government apply to the United Nations for postponing the LDC exit? Is there any need to apply and face humiliation at the United Nations? Because, to postpone the graduation, it must be passed in the United Nations General Assembly, which will not be possible to secure."
The country report gives an account of a period of prolonged macroeconomic stress as the economy was captured by oligarchs, giving rise to a kleptocratic regime during the past 15 years of autocratic rule.
The interim government, formed after the 2024 July uprising, took a raft of measures – pegged exchange rate, market-based interest rate and rationalising public expenditures – to restore macroeconomic stability and public confidence.
Concurring reforms in the revenue and banking sectors started giving dividends – by mid-2025, the economy showed early signs of recovery with GDP growth picking up, inflation easing and foreign exchange reserves improving, says the report submitted by the finance ministry's Economic Relations Division.
"Looking ahead, the government emphasizes economic diversification, institutional reforms, and sustainable growth, positioning Bangladesh to manage its LDC graduation and progress toward the Sustainable Development Goals (SDGs)," it says.
The report finds Bangladesh's position firmer compared to countries including Indonesia and Sri Lanka, which saw regime change through mass uprising. As a sign of growing investor confidence, the report referred to a significant 12.5% surge in the Dhaka Stock Exchange (DSE) index in July, ranking third after Vietnam's and Thailand's stock markets.
However, the DSE index declined since then, ranking among the worst performers in September and October among peers, before showing signs of a rebound in November.
To ensure a sustainable LDC graduation, the government has formulated and is implementing a Smooth Transition Strategy (STS)
Rising debt, US tariff: Tough path ahead
The quarterly GDP growth data for the first three quarters of FY25 indicate that Bangladesh's economy is gradually recovering from the mid-year slowdown caused primarily by political instability and reduced economic activity, it says.
Inflation, though remained persistently elevated, was relatively stable in recent months, while rising unemployment among the educated labour force remains a particular area of concern, it says, highlighting the lack of job security and the persistent mismatch between labour market needs and the skills produced by the education system.
It cites the persisting revenue shortfall reflecting challenges such as slow growth and a sluggish investment situation, and states measures to raise additional revenue equivalent to 0.5% of GDP in the upcoming fiscal year. The report mentions the interim government's initiative to re-evaluate large infrastructure projects which proliferated in the previous years.
Though categorized as "low-risk" country still, IMF's recent staff mission indicated that Bangladesh's risk category might be elevated from 'low' to 'medium' owing to evolving domestic scenarios, the report warns.
"It is safe to assume that with approximately 3 months of remittance inflow, the country will be able to repay all its external liabilities for the whole year, even during the peak (in FY27)," the country report says, with a cautious note that Bangladesh is entering a new level of debt management with access to long-term concession loans is gradually shrinking.
With a huge non-performing loan build-up during the previous regime, the banking sector is in a fragile state despite the interim government's reform measures such as reconstruction of bank boards, enactment of bank resolution ordinance and steps to merge five Shariah-based banks. "NPLs continue to pose a major concern, reflecting weaknesses in credit risk management and governance across several banks," the report says.
Energy shortage, coupled with reliance on imported fuel and inadequate investment in renewable sources, remains a concern, affecting domestic industry, it says.
Additionally, it fears, US reciprocal tariffs are likely to have a direct impact on world trade and Bangladesh's export performance and competitiveness in the US market. Although Bangladesh has been able to negotiate lower reciprocal tariffs with the US, "reciprocal tariff will bring additional impediment to smooth graduation," the country report says, citing decline in Bangladesh's exports to both US and EU in August and September.
Stating that the government has taken various initiatives, including port and NBR reforms, and easing the business environment ahead of the LDC graduation, Anisuzzaman said: "If we apply for a postponement of the graduation, then these reforms will not be possible to implement due to the bureaucrats.
Regarding the submission of Bangladesh's country report to the UN-CDP, he said: "This is a regular report. If the CDP has any questions based on this report, it will let us know, and we will provide clarification. Based on that, in the third week of next February, during the CDP meeting, the agency will announce its decision – whether they are satisfied or dissatisfied with our preparations – after an impartial verification."
Regarding the separate assessment being conducted through the UN in response to the demands of the businessmen, Anisuzzaman said, "The CDP will also analyse the UN report. However, the businessmen have made different, individual demands to the UN; they did not present a coordinated demand. Some have asked for a postponement of three years, while others have requested five years."
To ensure a sustainable LDC graduation, the government has formulated and is implementing a Smooth Transition Strategy (STS). The interim government has formed a high-level expert committee to monitor the implementation of this strategy. The preparation activities for the graduation are being kept under close observation at the highest level of government.
Professor Mustafizur Rahman, distinguished fellow at CPD, told this newspaper, "The report that the government has sent, mentioning the information that Bangladesh has fulfilled the three conditions for LDC graduation, is very reasonable. This is because, even if there are questions regarding the objectivity of our statistics, the government cannot hide the current state of the economy and provide false information."
He said that even though Bangladesh has fulfilled the three criteria for LDC graduation, there are challenges for sustainable graduation and in implementing the Smooth Transition Strategy (STS). "Due to the Mass Uprising in July-August of last year and the upcoming election, there are weaknesses in the preparation for implementing the 157 deliverables existing in the STS. Therefore, securing an additional three years for graduation would be positive for Bangladesh. Countries including Samoa and Angola have postponed their LDC graduation."
Prof Mustafiz said that investment in Bangladesh has decreased, and there is high inflation. There is also political uncertainty centred on the election. "Although some partner countries will provide preferential market access even after graduation, a commitment from the WTO regarding the waiver of TRIPS conditions following LDC graduation has not yet been received. However, even if we apply for the postponement of LDC graduation, we must certainly continue to prepare."
Regarding whether the UN would approve an application from Bangladesh to postpone its LDC graduation, he stated, "That decision will be made at the General Assembly. Before that, the CDP will give its opinion on the matter. The CDP's formal meeting will be held in the third week of next February. At that time, our attention will turn towards the election and the elected government."
Prof Mustafiz also mentioned that if Bangladesh is interested, the government can apply to postpone the LDC graduation at any time before the United Nations General Assembly.
When asked if the government's high-level committee for STS implementation had recommended that the government postpone the LDC graduation, he replied, "This committee has no mandate to make recommendations to the government on this matter. The committee's mandate is to monitor the implementation of the STS. Even so, if the government had sought the committee's opinion on this matter, I would have informed them. But the government is making the decision itself."
