Market Update: LDC graduation will expose economy to serious risks – Full Analysis

Bangladesh is not fully prepared to face the economic and institutional challenges that will follow its graduation from the least developed country (LDC) category later this year, business leaders and bankers said yesterday, warning that it could expose the economy to serious risks.

Speaking at a roundtable on the implications of LDC graduation for the banking sector, they cautioned that Bangladesh will gradually lose preferential market access, concessional financing and policy flexibilities, while facing intensified global competition, pressure on exports and rising living costs. 

These changes will place new pressures on the economy, particularly on the financial system, ICCB President Mahbubur Rahman said at the event organised by International Chamber of Commerce-Bangladesh (ICCB).

Noting that the graduation should be seen as a structural shift rather than a symbolic milestone, he added, “In the post-LDC era, a strong, credible, and autonomous central bank will be the anchor of financial stability and confidence.”

AK Azad, vice-president of ICCB, said there were real post-graduation impacts on exports and other sectors. “We clearly presented these to the interim government, but they did not agree.”

He urged the next government to take up the issue with urgency, as understanding and addressing the realities of LDC graduation would take time.

Simeen Rahman, chief executive officer of Transcom Group, said graduation would reshape Bangladesh’s policy space and competitiveness, particularly in sectors directly affecting people’s lives.

Emphasising the pharmaceutical industry, she said coordinated policy, regulatory efficiency, financial support and adequate transition time were crucial to preserving domestic strength and export potential. Local production of active pharmaceutical ingredients (APIs), she added, was a key preparatory step.

“If we place people’s health, industrial strength and financial stability at the centre of this transition, Bangladesh will graduate not only with pride but with confidence,” she said.

Former BKMEA president Fazlul Hoque said while graduation was welcome, the private sector remained deeply uneasy about preparedness. “The reality is that we are not well prepared. That is why we have been advocating for an extension,” he said.

However, he warned that even a two- or three-year extension would be meaningless without concrete action.

“We already had eight years to prepare… There were many meetings and seminars, but little real progress. If we waste the next few months, even with an extension, we will simply repeat the same discussions,” he said.

Muhammad A (Rumee) Ali, chairman of the ICCB Banking Commission, said despite extensive discussion of graduation’s sectoral impacts, the banking industry had lacked urgency and proactive policy dialogue.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said LDC graduation marked a new phase of development that demands maturity, discipline and vision.

“The banking sector must not remain a passive observer; it must act as an active architect of a more resilient, inclusive and globally competitive Bangladesh,” he said.

Meanwhile, offering a contrasting view, Bangladesh Bank Governor Ahsan H Mansur urged stakeholders not to frame graduation narrowly as a matter of tariff or trade privileges.

“It is part of a larger economic transformation,” he said, adding that Bangladesh must decide whether it wants to remain among fragile economies or aspire to stand alongside emerging and developed nations.

“Graduation is inevitable. The policies we need for graduation are the same policies we need for development – growth, human development, a strong currency and a resilient financial system,” he said.

Diversification, better logistics, improved ports, roads, communications, ICT, education and healthcare were all integral to both development and graduation, he added.

“Unfortunately, we have downsized the debate to protecting market access. That is not the core issue. Graduation and development go hand in hand,” he said.

Mansur also defended recent reforms, including contracts with global port operators, acknowledging that resistance was inevitable but necessary to ensure continuity. “The government decided to sign the contracts to preserve continuity for the future.”

He also criticised sections of the business community for supporting policies such as interest-rate caps that weakened the financial system.

“They never protested when bureaucrats siphoned money abroad. Where was the business community then? They were happy,” he said.

“We need vibrant associations, not puppet ones — associations that speak the truth without hesitation. Otherwise, democracy becomes little more than voting every few years while business continues as usual,” he added.