Diplomatic push at highest level to defer graduation

Since Bangladesh met all three criteria, namely, per capita Gross National Income (GNI), the Human Asset Index (HAI) and the Economic and Environmental Vulnerability Index (EVI), required to qualify for graduation from the LDC category during the 2018 and 2021 reviews, the UN finalised its graduation date for November 24, this year, allowing a five-year preparatory period. But the preparatory period could not be effectively utilised due to understandable reasons such as the multiple shocks of both global and domestic origin that the economy had been subjected to over the past years. In this context, the incumbent BNP government upon assuming office requested through a letter to the technical UN body concerned to extend the preparatory period for graduation. Against this backdrop, according to highly placed sources in the government who informed this paper, Prime Minister (PM) Tarique Rahman is learnt to have written recently to the UN Secretary-General Antonio Guterres for a deferral of the country's LDC graduation by at least three more years so that the transition is sustainable, resilient and truly irreversible. If the graduation deferral until November 24, 2029, as requested by the PM, is granted through the due process of the UN General Assembly, the country would get the breathing space necessary to complete the transition phase smoothly.
Notably, the interim government of Dr Muhammad Yunus, before it left office, was pressed by leading business chambers, trade associations and many economists for extension of the graduation preparatory period expressing concerns that the economy might be deprived of international support measures (ISMs) such as preferential trade access and concessional financing amounting to an annual loss of USD17.5 billion in exports, according to UNCTAD, if the graduation took place as per schedule. In the circumstances, the interim government recommended exploring coordination with other graduating countries such as Nepal and Laos PDR to seek an extension of the preparatory phase until 2030. The move made clear the intent of Dhaka to push its case at the highest diplomatic level, instead of relying just on the technical review process by the Committee for Development Policy (CDP), a subsidiary body of the UN Economic and Social Council (ECOSOC).
However, the interim government left the final decision on the deferral issue to the government to be elected upon its (interim government's) expiry. In this connection, referring to the initial 5-year preparatory phase being consumed largely by crisis management, the PM's note to the UN Secretary-General also dwelt on the fact that the economy that his newly elected government inherited was a severely strained one. As for instance, the macroeconomy underwent overlapping crises including capital flight over a prolonged period during the previous political government. Also, the growth of the private sector was hampered by its limited access to bank credit. And the capital market, which could be a potential source of finance for the private sector, too, was weakened. Small wonder the banking sector was under stress and to make matters worse, the fragility in the financial system undermined the poverty reduction efforts.
The multiple shocks to the economy caused macro-economic instability that included slower GDP growth, high inflation, declining foreign and local investment, and a reduced tax-to-GDP ratio. The Covid-19 aftereffects, 2024 floods, global price volatility and the burden of hosting a million displaced Rohingya population from Myanmar piled on the burden already weighing heavily on the economy. And declining international support for Rohingya refugees is further complicating the problem. All these issues have together severely constrained the fiscal space and institutional capacity of the government. Amid those challenges, a Smooth Transition Strategy (STS) was adopted in February 2025, leaving little time for implementation. So, the present economic realities as stressed in the PM's note to the top UN diplomat, it is believed, would make a strong case for the sought-after three-year deferral of Bangladesh's LDC graduation.