Do you like remaining poor? Not just you, no one likes being poor, staying poor, or being labeled poor.
But Nepal now finds itself in a situation, where it will once again remain in the group of poor countries. Although Nepal does not wish to continue being regarded as poor, the government has decided to postpone the country’s graduation from the Least Developed Country (LDC) category by another three years, as there are still no clear signs of long-term economic stability.
Nepal was scheduled to graduate this November from the group of LDC to the category of developing nations. The status of a LDC is a classification given by the United Nations (UN) to nations facing severe structural and socio-economic challenges. Countries in this category receive special international assistance, concessional financing, and preferential access to global trade markets.
Currently, there are 44 countries in the LDC category worldwide. Eight of them are in Asia. Nepal’s neighboring country Bhutan exited the group in 2023 after graduating from LDC status. However, Afghanistan, Bangladesh, Cambodia, Laos, Myanmar, Timor-Leste, Yemen, and Nepal still remain on the list of poor country. Nepal is now expected to remain among these poorer nations for another three years.
The government is preparing to present a proposal at the next cabinet meeting to formally defer Nepal’s graduation from LDC status for another three years. Once approved by the cabinet, the government will officially request an extension from the UN.
“Following discussions between Prime Minister Balendra Shah and Finance Minister Dr Swarnim Wagle on Friday, the government has begun preparations to postpone Nepal’s graduation from the LDC category by another three years,” according to a source.
If implemented, this will mark the third time Nepal has deferred its graduation from the LDC category.
The UN Committee for Development Policy (CDP) reviews countries every three years based on three indicators to determine whether they should remain on or graduate from the LDC list. The first indicator is poverty or income level. The second relates to weak human assets such as health, nutrition, and education. The third measures economic and environmental vulnerability, including instability in agricultural production, vulnerability to natural disasters, and structural economic weaknesses caused by small size or geographical remoteness.
The UN had already identified Nepal in 2015 as eligible for graduation to developing-country status by 2018 after meeting two of the three criteria. However, Nepal first postponed graduation after the devastating earthquake. At that time as well, current Finance Minister Dr Wagle was a member of the National Planning Commission (NPC) and played a key role in securing the extension. Since then, Nepal has sought extensions three consecutive times.
Under the current schedule, Nepal was set to officially exit the LDC category on November 24 this year.
Last Tuesday, a meeting of the ‘Nepal LDC Graduation: Smooth Transition Strategy Implementation and Coordination Committee’ held at the NPC decided to forward the proposal for postponement to the cabinet through the Finance Ministry. The meeting also decided that the UN would only be formally informed after obtaining executive approval from the cabinet.
Following that, Finance Minister Dr Wagle met Prime Minister Shah on Friday and appraised him of the committee’s recommendation to seek an additional three years – until November 2029 – for Nepal to remain on the LDC list.
According to an official, who attended the NPC meeting, the government plans to cite rising economic risks, the employment crisis, and the possibility of negative impacts on per capita income as reasons for requesting more time from the UN.
“The Finance Minister has already been informed about the postponement decision,” the official said, “The Finance Minister has also briefed the Prime Minister regarding the committee’s recommendation. However, cabinet approval is mandatory before sending a formal letter to the UN.”
Although Nepal has already informally informed the UN Economic and Social Council (ECOSOC) about its preparations, executive approval is still required for a formal decision.
Following discussions with Finance Minister Wagle, Prime Minister Shah has also directed that the proposal to postpone graduation be presented at the next Cabinet meeting. Sources said preparations are underway to include all the concerns identified by the NPC committee in the proposal.
Once approved by the cabinet, the government will immediately send an official letter to the UN requesting an additional three years before Nepal graduates from the LDC category.
Meanwhile, the private sector has long been urging the government to delay graduation from LDC status. Especially after the ‘Gen-Z Movement’ on September 8-9, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) formally requested the government to seek a three-year extension.
The private sector argues that investment expansion remains weak, geopolitical tensions in West Asia have increased uncertainty, and neighboring Bangladesh has also requested additional time for its own graduation process.
Business leaders warn that once Nepal exits the LDC category, it will lose the international trade concessions it currently enjoys, which could directly hurt Nepal’s already fragile exports. In such a situation, the private sector fears economic risks could intensify further.
In reality, despite policy support from consecutive governments, Nepal has failed to sustainably expand exports. Due to rising competition in both domestic and international markets, Nepal has been unable to strengthen its productive capacity, while confidence within the private sector remains low. As a result, businesses have been urging the government to prioritize removing Nepal from the Financial Action Task Force (FATF) grey list before moving ahead with LDC graduation.
According to various studies, Nepal’s exports could decline by around 4.3 percent or nearly Rs 30 billion after graduation from LDC category. The private sector has repeatedly warned that such a decline could negatively impact the broader economy as well.
FNCCI President Anjan Shrestha has also argued that the government’s increasingly harsh treatment of entrepreneurs and weak capital expenditure have made the economy more unstable and uncertain. According to him, graduating from LDC status would not be in Nepal’s interest at a time when private-sector confidence is already weak.
Finance Minister Dr Wagle has also acknowledged the fragile state of the economy. He has repeatedly stated publicly that it may take another two-and-a-half-year for the current economic uncertainty to stabilize. For this reason, there are growing concerns that graduating from the LDC category before the economy stabilizes could be risky and might even increase the possibility of Nepal slipping back toward the ranks of poorer nations.
Though, Nepal would still receive a three-year transition period after graduation to strengthen its capacity and competitiveness, it has not been confident on building its competitiveness.
The government’s conclusion is that extending the timeline by another three years could provide an opportunity to build a stronger economic foundation. However, the government had made similar commitments during previous extensions as well, yet the expected results have been eluding.
.
