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WEDNESDAY, JUNE 18, 2025
It’s time to prepare for LDC graduation challenges

Analysis

Professor Mustafizur Rahman
20 January, 2021, 10:50 pm
Last modified: 21 January, 2021, 10:54 am

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It’s time to prepare for LDC graduation challenges

Bangladesh may stop getting foreign grants and soft loans altogether after its graduation from the status of least-developed country by 2026

Professor Mustafizur Rahman
20 January, 2021, 10:50 pm
Last modified: 21 January, 2021, 10:54 am
Professor Mustafizur Rahman; Illustration: TBS
Professor Mustafizur Rahman; Illustration: TBS

Bangladesh's economy has been facing difficult situations with respect to foreign loans and grants after being promoted to the lower-middle income status in 2015.

Since then, development partners have been reducing the amount of aid to Bangladesh. Soft loans have come down as well. Interest rates on foreign loans have gone up, while the time for repayment and the grace period have been shortened.

Bangladesh may stop getting foreign grants and soft loans altogether after its graduation from the status of least-developed country by 2026. On top of that, if it loses duty-free access to different nations, the country's foreign trade will come under threat.

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There is no doubt that we will have less access to the international market. It is very difficult but not impossible to overcome all these hurdles and take the country to the level of upper-middle income nations by 2031.

However, in order to take the country to the upper-middle income status, it is imperative to ensure sustained growth of the gross domestic product (GDP). The pandemic will hamper the economic growth of this fiscal year like the previous fiscal year.

There should be a further increase in production to make up the loss incurred in these years and reach the target. And there is the issue of availability of resources needed to achieve the targeted growth.

The time before the elevation from the LDC status should be used wisely to reach the goal of upper-middle income status. Within this time, the nation has to take the preparation to deal with challenges that will emerge after the graduation from the LDC status.

Our workers lack skills and productivity. If this problem is not addressed, entrepreneurs will not be able to compete in the international market. To increase competitiveness, businesses will have to cut their costs.

The country also lacks good governance and institutional capacity. Without all these, the private investment will not increase and foreign direct investment will not flow in as much as expected.

Considering the international context, the elevation to the upper-middle income status has both uncertainties and challenges. The country has to implement major reforms to deal with them.

We have to think hard to find a way to retain the preferential access to foreign markets after transition from the LDC status. The government has to start negotiations immediately to get GSP Plus benefits in the European Union when the GSP or EBA benefits will phase out.

To meet the conditions to get the benefits, we have to take some preparations.

Apart from that, the government has to put in efforts to join regional and sub-regional alliances linked to transport, multimodal connectivity and preferential trading rights.


Professor Mustafizur Rahman is a Distinguished Fellow of the Centre for Policy Dialogue


 

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Least Developed Country (LDC) / Bangladesh / Professor Mustafizur Rahman / Goal 2031

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