Navigating Uncertainty: Bangladesh’s LDC Graduation, Deferral Debate, and the Future of Reform
Citation: Raihan, S. (2025). Navigating Uncertainty: Bangladesh’s LDC Graduation, Deferral Debate, and the Future of Reform. SANEM & Australian High Commission Policy Paper Series. SANEM Publications, Dhaka, Bangladesh.
Bangladesh’s graduation from the Least Developed Country (LDC) group in 2026 is a historic transforming event, which identifies decades of hard-won economic and social achievements. But the shift does not come without its dangers. Graduation will mark the phase-out of LDC-specific international support measures, such as duty-free market access, concessional finance, and special and differential treatment under global trade regimes. It’s in the context of this transition that the Smooth Transition Strategy (STS) was developed to protect gains. Yet the same has been poorly implemented, dispersed with the National Plan, and unsatisfactorily involved stakeholders.
This policy paper presents the contexts and perspectives leading up to Bangladesh’s graduation, critically reviews where the STS currently stands, and whether a request for deferral should be made in view of the accelerating domestic and global constraints. It underscores the vulnerabilities of Bangladesh’s economic structure, fiscal space, institutional capacity, and human capital, as well as the uncertainties associated with changing trade patterns, compliance conditionalities related to sustainability, and diminishing concessional financing.
The analysis highlights that there is a need for a more operational and politically grounded approach to the transition. Enabling the private sector, diversifying exports, shoring up fiscal and institutional capacity-building, and embedding sustainability in industrial policy come out as the main resilience pillars. The paper suggests three practical options for the private sector and emphasizes the role of political economy in determining the feasibility of reform.
And in the end, the paper suggests that graduation is less of an endpoint to be celebrated and more of a spur for profound economic reform. A recalibrated, inclusive, and well-orchestrated transition approach is crucial for Bangladesh to make graduation an opportunity for sustained, inclusive, and sustainable growth.
