Nepal seeks to postpone LDC graduation until 2029

Nepal is taking a prudent step by seeking to defer its graduation from Least Developed Country (LDC) status. The Ministry of Foreign Affairs' decision to request a postponement until November 2029, communicated to the UN Committee for Development Policy, reflects a realistic assessment of the nation's current economic vulnerabilities.

“

The decision was taken in view of changing national and international economic and political circumstances, including geopolitical tensions, disruptions in global supply chains and their impact on remittance inflows.

This move, as reported by the Kathmandu Post, is not about avoiding progress but about ensuring a stable transition. The government rightly points to a confluence of challenging factors: lingering effects of the COVID-19 pandemic, global geopolitical tensions, and the increasing impacts of climate change. These external shocks have put significant pressure on Nepal's recovering economy, affecting crucial foreign exchange earnings from remittances and increasing costs for fuel, food, and fertilizers.

“

Nepal is concerned that graduation from LDC status would result in the loss of existing international support measures, including Duty-Free and Quota-Free (DFQF) market access facilities currently available to Nepali exports.

The primary concern, and a valid one for any developing nation, is the potential loss of preferential trade access. Losing Duty-Free and Quota-Free (DFQF) facilities could severely impact key export sectors like garments, pashmina, and carpets. Studies projecting a significant decline in employment in productive sectors underscore the economic risks associated with a premature graduation. The Kathmandu Post's reporting highlights the consensus among government officials and private sector representatives that Nepal is not yet adequately prepared economically or institutionally for this transition.

“

Studies have projected that employment in productive sectors could decline by as much as 35 percent after graduation if adequate transition measures are not put in place.

While international bodies might view LDC graduation as a mark of progress, from Nepal's perspective, it's crucial to manage this process strategically. The nation has met the criteria before but has wisely postponed graduation due to unforeseen crises like the 2015 earthquake and the pandemic. This latest request demonstrates a commitment to sustainable development, prioritizing national economic stability and the livelihoods of its citizens over a symbolic timeline. The focus must remain on building robust economic resilience before shedding the support mechanisms that have been vital for its growth.

“

The latest developments in the Middle East had affected remittance inflows, one of Nepal’s main sources of foreign exchange earnings, while rising prices of fuel, food and fertilisers had affected tourism and the broader economy.