Late graduation : Why Bangladesh should slow down, not step off the LDC runway

Bangladesh is set to graduate from the United Nations’ Least Developed Country (LDC) category in November 2026. The UN’s 2025 review confirms that we now meet all three thresholds: Income, human assets, and vulnerability. This is no small feat; it reflects decades of progress in poverty reduction, industrial growth, and social investments.

 

But graduation is not a medal ceremony. It is a stress test of whether our economy, society, and institutions can withstand the removal of LDC protections. On this front, warning signs are already visible, particularly for young people, small businesses, women who remain excluded from digital access, and millions dependent on affordable healthcare.

The debate on graduation often circles around RMG, trade preferences, and GDP growth. But beneath the headline numbers lies a stark reality: Too many young people are not part of the country’s growth story. Monitoring by the Economic Relations Division’s Support to Sustainable Graduation Project warns that the share of youth not in education, employment, or training -- what we call NEET -- is creeping close to 40%. Meanwhile, women are also disproportionately represented.

 

 

 

A national survey led by the South Asian Network on Economic Modelling earlier this year found that 87% of youth had not applied for a single job in the past year, and nearly half of those who tried never received a response. This points to a painful mismatch between the promises of policy and the reality of the labour market. It is one thing to speak of a “demographic dividend” -- but what dividend do we reap if four in 10 young people are left idle?

 

 

Family finances underline this divide. The Power and Participation Research Centre’s survey in 2025 showed most families have seen incomes stagnate or fall since 2022. The poorest 40% regularly spend more than they earn, forced into debt or hand-to-mouth survival. The richest 20% continue to save, while the middle 40% are squeezed between falling earnings and rising costs. The gap between this middle group and the wealthiest has widened to about Tk50,000 a month. In simple terms, Bangladesh is splitting into two economies: One secure, one constantly exposed to risk.

 

 

And the usual cushions are thin. Bangladesh Bank’s own reporting shows inflation remained high throughout 2024, eroding whatever gains low-income households managed. At the same time, the UN has repeatedly warned that our chronically low tax-to-GDP ratio leaves little fiscal space to support vulnerable groups during the transition. Confidence in the system took another blow when the central bank admitted export receipts had been overstated by billions due to reporting errors. Before talking about global competitiveness, we must first fix our own statistical plumbing.

 

 

Globally, the trade environment is getting harsher just as our preferences start to expire. The European Union has given graduating LDCs a grace period until 2029, but other markets are not so generous. In the United States, our single largest apparel market, tariffs are now set at around 20 percent after months of negotiation, still a big jump compared to what exporters are used to. For buyers already exploring alternatives in Vietnam or Ethiopia, higher costs may be the nudge to move elsewhere. At the same time, USAID -- one of the most important development partners for decades -- formally shut down operations in Bangladesh in early 2025, after Washington’s stop-work order. Programs supporting health, governance, and civil society have closed, and thousands of sector jobs have disappeared with them. Put simply: We are facing higher trade costs while losing a long-standing source of external support.

 

 

The pain will not be felt equally. Small and medium enterprises, which form the backbone of our economy and the entry point for youth employment, are at particular risk. Unlike large RMG exporters, SMEs lack cash reserves and the capacity to comply with tightening global standards -- from rules of origin to carbon accounting. ERD’s own transition strategies admit that, unless SMEs get access to compliance finance, they will struggle to survive. And if SMEs falter, young workers and entrepreneurs lose their first stepping stones. One only needs to look at how many local start-ups folded during the Covid-19 pandemic when credit lines dried up to see how quickly shocks can erase years of effort.

 

 

Graduation also raises sector-specific risks. Our pharmaceutical industry has thrived under LDC-era flexibilities in global trade rules, especially the exemption from enforcing patents on medication. This has allowed local firms to produce affordable generic drugs, serving millions at home and supplying to over 150 countries. Once those exemptions expire, companies will face patent restrictions, licensing fees, or the loss of entire product lines. For families already struggling with stagnant incomes, higher drug prices could be devastating. Imagine the cancer patient in Dhaka who currently relies on affordable generics suddenly facing a five-fold increase in treatment costs. This is not just a trade issue; it is a public health emergency waiting to unfold.

 

 

The gender divide in digital access makes matters worse. Research by GSMA shows Bangladeshi women are significantly less likely than men to own a mobile phone, use mobile internet, or access mobile financial services. These gaps have not closed; in some cases, they have widened. Without targeted policies to bridge this divide, women will remain cut off from the digital platforms that drive modern commerce and education. Talking about a “digital dividend” while half the population cannot fully connect is more illusion than reality.

 

 

The government has prepared a playbook. The Economic Relations Division has outlined a Smooth Transition Strategy, updated tariff and logistics policies, begun reforms in intellectual property laws, and opened talks with Japan for an economic partnership. These are steps in the right direction. But Bangladesh has often struggled with execution, inter-agency coordination is slow, reforms are delayed, and political trade-offs get muddled. Drafting strategies is not enough; delivery is what counts.

 

 

This is why a delay, if it could be negotiated, would not be a sign of weakness but of prudence. Extra time would give Bangladesh space to repair its statistical systems, expand fiscal capacity through tax reforms, and secure more favourable trade deals before preferences vanish. It would allow SMEs to adapt to new compliance requirements and the pharmaceutical sector to prepare for a post-TRIPS environment. Most importantly, it would provide breathing room to address youth unemployment and close the digital gender divide so that the benefits of graduation are more widely shared. In aviation terms, we should not take off when the engines are still being repaired.

 

 

Bangladesh deserves recognition for its progress. But if graduation is treated only as a symbolic date rather than a test of readiness, it risks becoming a milestone for the elite and a burden for ordinary citizens. The real measure of success will be whether a young Bangladeshi -- especially a young woman -- can find a decent job in a competitive firm, whether a low-income family can survive a shock without debt, and whether patients can continue accessing life-saving medicine. These goals are still within reach, but only if we slow down just enough to fasten the seatbelts before taking off.

 

SM Shaikat is Executive Director of SERAC-Bangladesh.