Bangladesh not fully prepared for post-LDC smooth transition: UN assessment report
Finance minister says some more time is needed to effectively tackle LDC graduation challenges
Highlights
- Losing duty-free EU access could trigger 12% apparel tariffs, favoring regional competitors
- Non-performing loans have hit 35%, paralysing investment during the transition
- Debt servicing now consumes 31% of revenue as government income stays critically low
- Bangladesh has requested a three-year extension to avoid disrupting fragile development gains
As Bangladesh moves towards its scheduled graduation from Least Developed Country (LDC) status on 24 November 2026, a new assessment highlights significant risks and structural vulnerabilities that could undermine a smooth transition.
While Bangladesh meets the graduation criteria, it is not fully prepared for a sustainable post-LDC phase due to long-standing issues such as loss of trade preferences, macroeconomic pressures, fiscal and financial vulnerabilities, and institutional and implementation weaknesses, the UN-sponsored assessment finds.
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With significant readiness gaps remaining, the 2026 graduation could disrupt development gains, making the coming months crucial for policy action and decision-making, concludes the Bangladesh Graduation Readiness Assessment, conducted by the UN Office of the High Representative for LDCs.
The report was discussed at a stakeholders' meeting today (5 April) at the National Economic Council auditorium in Sher-e-Banglanagar, attended by ministers, trade diplomats, and representatives from the private sector and international agencies.
Speaking as chief guest, Finance and Planning Minister Amir Khosru Mahmud Chowdhury said the country is not yet fully prepared to achieve this goal. Key challenges include pressures from foreign and domestic debt, the high cost of borrowing, and weaknesses in overall financial management.
The minister added that the current global energy crisis and disruptions in international supply chains could place further strain on Bangladesh's economy. "The impact will extend beyond the energy sector, affecting markets for food and other goods and driving up inflation, which is already a global concern."
He further said that while fuel prices have surged worldwide, Bangladesh has so far kept them relatively under control, though the government cannot maintain this indefinitely.
"Being an elected government, we are trying to avoid placing sudden extra burdens on the people. Yet if financial pressures continue and government resources are drained, the ultimate cost will fall on citizens. Economic decisions must therefore be taken with extreme caution, balancing public welfare with long-term stability of the economy," he added.
Months before the Middle East conflict, Bangladesh formally requested a three-year extension of its preparatory period to November 2029 under the Enhanced Monitoring Mechanism.
It also sought an independent Graduation Readiness Assessment from the UN Office of the High Representative for LDCs, Landlocked Developing Countries, and Small Island Developing States, which commissioned the report.
'Past five years consumed by crisis management'
Economists Daniel Gay and MA Razzaque presented the report's key findings, highlighting the external and domestic crises Bangladesh faced during the five-year preparatory period from 2021.
These included the Rohingya refugee crisis, the Covid-19 pandemic, the Russia-Ukraine war, the July 2024 political transition, inflation, fiscal stress, falling investment, and rising debt.
Rather than a period of strategic preparation, the report notes, the past five years were dominated by crisis management, economic stabilisation, and political survival. It adds that the Middle East crisis has further disrupted supply chains, caused energy price volatility, and raised risks in remittance inflows.
The assessment identifies six critical vulnerabilities. Chief among them is potential loss of preferential access to the European Union market, which accounts for 44% of Bangladesh's exports.
An extension or postponement of graduation for around three years would allow time to strengthen key economic fundamentals.
Under the GSP+ scheme beyond 2029, apparel exports could face 12% tariffs, compared with zero-duty access now, leaving Bangladesh at a disadvantage versus competitors like Vietnam and India.
The report also flags a deepening banking sector crisis, with NPLs reaching 35% of total credit by September 2025, weakening the financial sector's ability to support investment.
Fiscal pressures are mounting, with government revenue at just 6.8% of GDP and debt servicing consuming about 31% of revenue. The IMF and World Bank have already classified Bangladesh's debt distress risk as "moderate," the report mentions.
Structural competitiveness challenges persist, including logistics costs around 16% of GDP, port congestion, customs inefficiencies, and energy shortages that raise production costs. Implementation capacity remains weak, with slow progress on the government's transition strategy due to limited coordination and administrative strain.
Social pressures are rising as well. Inflation has pushed an estimated 90 lakh people into poverty, raising the poverty rate to over 21.2% in 2025 from 18.7% in 2022. Employment fell by 19 lakh between 2023 and 2024, disproportionately affecting women and highlighting a fragile labour market.
Given these challenges, the UN Committee for Development Policy allows for possible deferral under exceptional circumstances, citing General Assembly resolution 67/221 (2012), which stresses that graduation "should not disrupt the development progress achieved" by a country.
Govt waiting for UN CDP's response
Earlier, the government formally requested a three-year extension, signalling that while Bangladesh meets the formal criteria for graduation, the challenge lies in managing the transition.
According to the Economic Relations Division (ERD), a clear process governs any decision on postponing graduation. First, the UN Committee for Development Policy (CDP) evaluates whether an extension is warranted. If so, the CDP submits its recommendation to the UN Economic and Social Council (ECOSOC). After review and approval by ECOSOC, the matter goes to the UN General Assembly for final endorsement.
ERD sources said the CDP has not yet issued a final assessment. While it was initially expected in March, the report has now been delayed to May. A key ECOSOC meeting on 10-11 June may discuss Bangladesh's request, where preliminary decisions or recommendations could emerge.
UN Under-Secretary-General and High Representative for LDCs Rabab Fatima said the request is under CDP review. "Once the technical assessment is complete, CDP will submit recommendations to ECOSOC, which will form the basis for a UN General Assembly decision."
ERD Secretary Shahriar Kader Siddiky said the extension request does not indicate a change in graduation ambition, but is a strategic measure to ensure a smooth, sustainable, and irreversible transition.
Govt 'firefighting' to manage daily crises: Khosru
Endorsing the identified vulnerabilities, Minister Amir Khosru said Bangladesh is currently navigating a complex economic situation, where the government is largely "firefighting" to manage daily crises.
He added that the government inherited an economy where all key macroeconomic indicators were in decline. "We are simply fighting to salvage the economy," he said.
The government views capacity building as the most critical factor for navigating this crisis, he said, claiming the policies outlined in the BNP manifesto have been explicitly aligned with this approach.
"If these policies are implemented effectively and on schedule, the economy can gradually be strengthened on a solid foundation, making it possible to prepare for LDC graduation," said the minister.
He also said that an extension or postponement of graduation – around three years – would allow time to strengthen key economic fundamentals.
"If necessary reforms, capacity building, and economic stabilisation can be achieved during this time, graduation will become a realistic and sustainable goal.
Commerce Minister Khandakar Abdul Muktadir highlighted prudent debt management and expanding the tax base as essential to regaining economic momentum.
Rashed Al Mahmud Titumir, finance and planning adviser to the prime minister, added that structural transformation, economic diversification, and productivity enhancement are crucial to achieving a "Trillion Dollar Economy" by 2034.
State Minister for Planning Zonayed Abdur Rahim Saki said the government will prioritise medium- and long-term development plans that explicitly address the challenges of LDC graduation.
