To defer or not to defer: The LDC graduation conundrum

During the United Nations Committee for Development Policy's (UNCDP) assessment of Bangladesh's economic vulnerabilities in October-November, the government will have the opportunity to request a deferral of the country's LDC (Least Developed Country) graduation in 2026.

Experts warn that if the government does not apply for an extension at that time, it may be very difficult to do so later. The government, however, says the deferral can be requested anytime.

Bangladesh is set to graduate from LDC status in November 2026. Yesterday, leaders of the country's top business associations demanded that the timeline be pushed back to 2032.

However, Chief Adviser's Special Assistant Anisuzzaman Chowdhury told TBS that the interim government is not considering deferring LDC graduation based on business leaders' demands.

Speaking via WhatsApp from Sydney yesterday evening, he said, "I am in regular communication with the chief adviser regarding LDC graduation, and we are working as per his instruction. The government will not consider deferring graduation at this stage just because of business leaders' demands.

"Any country may request deferral at any time. If the next elected government after the polls considers deferral, that is a different matter."

He noted that garment owners were the first to call for deferral, and footwear exporters have now joined them. "Half of our garments are exported to Europe, where duty-free benefits will continue until 2029. The other half goes mainly to the US, which is unrelated to LDC status. Our footwear exports are also to Europe and the US. So, the government is not willing to show weakness by granting their demand."

Commerce Adviser Sk Bashir Uddin told TBS that no discussion has yet been held within the government about deferring LDC graduation.

"The chief adviser's stance has already been conveyed by the finance adviser," he said yesterday.

Back in May, Finance Adviser Salehuddin Ahmed said at an event, "We are trying to graduate in 2026 as a developing country. There is a lot of debate – whether to graduate or not – but we decided that we will go for [graduating]. We will prepare accordingly."

Anisuzzaman Chowdhury added that business leaders are citing energy shortages, traffic congestion, and logistical weaknesses as reasons for deferral. "But LDC graduation deferral will not solve these problems. The government is working sincerely to address them. Port management has improved, and more than 45,000 licences have already been issued under the National Single Window."

The National Single Window is an electronic system that allows traders to submit import, export, and transit information to multiple government agencies through a single gateway, bringing seven customs agencies under one system to make import and export processes easier.

Anisuzzaman criticised garment owners for holding the economy hostage for 50 years by relying on government benefits. "They did not diversify their products or markets. Because of Covid-19, Bangladesh's graduation was already pushed back from 2024 to 2026. Why didn't they prepare even with that extra time?"

According to him, there is no scope to retreat from LDC graduation. "If we go back now, the world will laugh at us. When Zimbabwe's economy collapsed, the UN offered the country to remain an LDC, but Zimbabwe refused, saying, 'We will not wear this garland of shame.'"

Based on discussions with the chief adviser, steps are being taken to strengthen shipbuilding, pharmaceuticals, leather, and electronics industries ahead of graduation.

He said, "South Korea went from being one of the world's poorest countries to a strong developing economy in just 15 years by focusing on electronics. I have already visited Incepta and Beximco pharmaceutical factories. I will also meet with all stakeholders linked to Chattogram port to further improve port operations."

What experts say

Former Bangladesh Trade and Tariff Commission member Dr Mostafa Abid Khan told TBS that UNCDP's October-November assessment will review Bangladesh's economic vulnerability, human development indicators, and overall situation. At that time, the government will have the opportunity to indicate whether it wishes to defer graduation and to explain its reasons.

Even after the assessment, the government could still apply for deferral, but it would be much more difficult then, he said.

He noted that even after graduation in 2026, Bangladesh will continue to enjoy duty-free access to 67% of its export markets including the EU, the UK, Canada, and China. With rising exports, remittances, and foreign currency reserves, it would be difficult to justify a deferral request in October-November.

The PRI researcher added that only two countries have successfully deferred graduation with justification. Angola, which had qualified only on GNI per capita, later saw its per capita income drop below UN thresholds due to a sharp fall in global oil prices, and thus deferred graduation. Nepal also deferred due to a devastating earthquake.

He added, "Bangladesh's exports will not suffer after 2026 graduation. But exporters will lose the cash incentives they currently enjoy, which is why they are demanding deferral."

Another expert, requesting anonymity, told TBS that applying during the UNCDP assessment would make deferral easier, but once the assessment is over, the next elected government will have little scope to apply.

He said that while the government has prepared a smooth transition strategy, neither the government nor the private sector has taken sufficient preparation. "With slowing GDP growth and weaknesses in the banking sector, if the government now applies for deferral, the UN may accept it. But such justifications may no longer exist after the election."