Graduation readiness needs a decisive budget boost

The forthcoming national budget comes at a critical moment.

Bangladesh is seeking additional time to prepare for LDC graduation, but extra time will matter only if it is used for reform. The budget should therefore show, clearly and credibly, how the government intends to strengthen export competitiveness, restore confidence, and prepare the economy for the post-LDC period.

Macroeconomic stability first

Export competitiveness cannot be built on a fragile macroeconomic base. High inflation, low reserves, exchange-rate uncertainty, banking-sector weaknesses and rising debt pressures are already affecting business confidence. The budget should therefore provide a credible stabilisation path, with clear measures for inflation control, revenue mobilisation, banking-sector discipline, better expenditure prioritisation and a more predictable foreign-exchange regime. Without macroeconomic stability, other graduation-related measures will have limited impact.

Remove policy barriers to exports

The budget should deal with the policy bias that favours domestic-market production over exports. Tariff and para-tariff rationalisation should be pushed forward in line with the National Tariff Policy, while still allowing reasonable protection for domestic industries. Exporters must be able to import raw materials at world prices. This requires improved bonded-warehouse access and practical alternatives for exporters outside the bonded system, including allowing them to import raw materials equivalent to 70 per cent of their f.o.b. export value without unnecessary barriers. Export support should also not be withdrawn too quickly before alternative WTO-compatible measures are in place. Implement provisions to support diversification, technology upgrading, compliance and new market entry.

Fix energy, logistics and compliance gaps

For exporters, uninterrupted energy supply is now a competitiveness issue. The budget should provide a clear, funded plan for reliable power and gas supply to export-oriented firms. It should also direct the implementation of the National Logistics Policy to reduce port delays, customs bottlenecks and transport costs. A firm and time-bound commitment is needed to make the Savar Central Effluent Treatment Plant operational, without which leather goods and footwear exports will continue to face serious compliance constraints. The budget should also allocate resources for priority actions under the Smooth Transition Strategy, especially standards, testing, certification, labour compliance and environmental readiness. In addition, Bangladesh must invest in strengthening its legal and judicial capacity to deal with a possible rise in TRIPS-related infringement cases after LDC graduation. its legal and judicial capacity to deal with a possible rise in TRIPS-related infringement cases after LDC graduation. This is not only an export-market concern. In pharmaceuticals, where domestic firms meet around 98 per cent of local demand, weak capacity to manage patent-related disputes, licensing issues and enforcement questions could undermine firm-level confidence, domestic supply capacity and affordable access to medicines.

Use trade diplomacy with urgency

Bangladesh must pursue focused diplomacy to secure the requested three-year extension through the UN General Assembly and not the shorter duration the CDP has indicated. At the same time, engagement with the European Union must begin immediately to secure an appropriate post-graduation trading arrangement, especially for garments. India should also be approached early to maintain duty-free access after graduation, given its growing importance as an export market.

Make FDI central to export transformation

Export diversification cannot be achieved by domestic firms alone. Bangladesh needs export-oriented foreign investment to connect non-RMG sectors with global value chains, technology, buyers, quality systems and distribution networks. The budget should therefore prioritise a few selected economic zones and make them fully functional, with reliable energy, serviced land, customs facilitation, compliance infrastructure, skills support and fast-track regulatory services. If necessary, disciplined incentives should be offered to attract credible anchor investors in export-oriented sectors.

The budget should send one simple message: LDC graduation preparedness requires financed action, not merely policy statements. Most of the required reforms are already known. What is now needed is adequate resourcing for fast-tracked implementation, clear responsibility, and visible progress.

The author is an economist, who also serves as Chairman of Research and Policy Integration for Development (RAPID), a think tank based in Dhaka.