A new study by Research and Policy Integration for Development (RAPID) has raised concerns over the economic impact of Bangladesh’s transition from Least Developed Country (LDC) status. According to the study, Bangladesh’s exports to the European Union (EU) could decline by 21.2 percent due to Vietnam’s free trade agreement (FTA) with the EU. As a result, the country’s Gross Domestic Product (GDP) growth could decrease by up to 1 percent.
The study highlights that while Vietnam’s FTA with the EU reduces tariffs on its products, Bangladesh will face increased tariffs on its exports after it graduates from the LDC list in 2026. Though Bangladesh will retain some benefits in the EU market for the next three years, these advantages will expire after that, leading to higher tariffs on Bangladeshi goods.
This transition is particularly concerning as 48 percent of Bangladesh’s exports are destined for the EU market. Key sectors, including leather and leather products, jute, agriculture, processed agricultural products, and pharmaceuticals, may suffer significant losses in export capacity once cash incentives for exports are no longer available post-graduation.
In response to these potential challenges, the Ministry of Finance has recently formed an inter-ministerial committee to explore alternative incentives to support exporters. However, the growing uncertainty surrounding post-graduation incentives and the EU trade dynamics poses a serious risk to Bangladesh’s economy as it navigates the complex process of LDC graduation.
Bangladesh is facing a significant economic challenge as it prepares for its transition from a Least Developed Country (LDC) status. Amid political instability, gas and electricity shortages, rising inflation, high tariffs on imports, and high interest rates, the economy is grappling with multiple crises. Foreign exchange reserves are shrinking, revenue collection is falling short, and there has been a lack of new investments and job creation, leaving the country in a weak position as it approaches the LDC exit in November 2026.
Business leaders and economists are concerned that the transition, scheduled for November 24, 2026, could lead to the loss of crucial preferential trade agreements and increased global competition. A study by the Planning Department suggests Bangladesh could lose around $7 billion in exports due to the end of duty-free benefits. With 73% of Bangladesh’s exports benefiting from these duty-free privileges, the post-LDC period may severely impact key industries, especially the ready-made garment sector.
The Dhaka Chamber of Commerce and Industry (DCCI) President, Taskin Ahmed, has called for a delay of 2-3 years for the LDC transition, citing weak GDP growth and stagnation in the manufacturing sector. Similarly, industry leaders like Mohammad Hatem of BKMEA and the Bangladesh Exporters Association have raised alarms over the feasibility of a smooth transition given the current economic climate.
Economist Dr. Debapriya Bhattacharya also pointed out that the original LDC transition plan was based on inaccurate data from the previous government, suggesting a need for a revised roadmap. Economist Dr. Debapriya Bhattacharya, who authored a white paper on Bangladesh’s transition from Least Developed Country (LDC) status, has raised serious concerns about the potential consequences of the country’s impending LDC graduation. He pointed out that several countries have reversed their LDC transition due to various factors, including political changes. Dr. Bhattacharya emphasized that the original LDC transition path was based on incorrect data provided by the previous government, which has since been proven to be inaccurate. He called for a revision of the transition target, suggesting that the government should take more time to create a new, sustainable roadmap.
He warned that pushing through with the current LDC transition timeline, set for November 24, 2026, could lead to disastrous consequences for Bangladesh’s economy. He likened it to a “deliberate preparation for suicide” if the process is not reevaluated.
The transition has been criticized for a lack of proper planning and implementation. While the move to graduate from LDC status was driven in part by political motives, there has been insufficient focus on how to ensure a sustainable transition, especially in terms of private sector input. Key areas such as diversification in the ready-made garment sector and the development of the packaging sector have not received enough attention, leaving these industries vulnerable.
There are also growing concerns about the loss of cash incentives for exports once Bangladesh graduates from the LDC list. Industry leaders are uncertain about what alternative support the government will offer and whether it will be able to continue providing crucial benefits, such as electricity bill concessions for the export sector, in line with World Trade Organization (WTO) rules. These uncertainties could put immense pressure on industrial owners, further complicating the transition process.
Many in the private sector feel that the LDC transition process has been poorly planned and implemented, with a lack of focus on diversification beyond the garment industry and the development of other export sectors. There is also uncertainty about what alternatives the government will provide to replace cash assistance and whether export incentives, such as electricity rebates, can continue under WTO rules. As Bangladesh moves toward LDC graduation, concerns about its ability to cope with these challenges continue to grow, with experts warning that without proper preparation, the transition could undermine the country’s economic stability.
