After 50 years, Nepal to graduate from LDC

After being in a category of least developed country (LDC) for five decades since 1971, Nepal is finally graduating to the developing country category as the United Nations General Assembly (UNGA) on Wednesday approved a proposal of Nepal's graduation to a middle-income developing country by 2026.

The 40th plenary of the 76th Session of the UNGA unanimously adopted a resolution endorsing the graduation of Nepal from the LDC category with the preparatory period of five years, according to press note issued by the Permanent Mission of Nepal to the United Nations in New York.

"As a result, Nepal will graduate from the LDC category by December 2026 and until then will continue to receive all concessions and support measures as LDC,” the press note reads.

In addition to Nepal, the graduation of Bangladesh and the Lao People’s Democratic Republic has also been endorsed by the UNGA.

Nepal now needs to prepare smooth national transition strategy, with the support of the UN system and in cooperation with their bilateral, regional, and multilateral development and trading partners. After the graduation from LDC category, a country will not get grant, and also loses preferences it is getting as LDC, thus pressuring for strong domestic production base.

After the adoption of the resolution, permanent representative of Nepal to the UN Amrit Bahadur Rai reiterated Nepal’s commitment to making all-out efforts for a smooth graduation with the enhanced level of support from the development partners, including the UN system. "Nepal graduating from LDC status in 2026 is a great milestone, indeed," he added.

But Nepal should make efforts that it won't slip backwards. Rai also pledged for Nepal to do its best to undertake all required procedures for its structural changes for the same within the next five years. "The Government of Nepal has completed strategic efforts for the graduation," he said, adding that it is an opportunity for the country to raise its image in the international forum by creating structures for its economy within the next five years. "We have also urged for addressing challenges that may emerge after 2026, and will reach a conclusion to this effect after holding a dialogue with development partners."

Nepal has twice deffered its graduation due to devastating earthquake in 2015 and lack of preparation in 2018. Usually, graduation from LDC status becomes effective three years after the UNGA takes note of the recommendation made by the Committee for Development Policy under the United Nations Economic and Social Council to graduate a country. But due to Covid-19 pandemic, this time, the countries have been given five years of preparatory period on an exceptional basis.

The five-year preparatory period, however, is provided for a smooth transition, recognising the effect of the Covid-19 pandemic and the resulting need to implement policies and strategies to reverse the pandemic’s damage to the economic and social sectors, the press note reads.

The resolution has mandated the Committee on Development Policy, a subsidiary body of the Economic and Social Council, to analyse the adequacy of the preparatory period at its 2024 triennial review and recommend further extension, if necessary, the press note adds.

In the last two triennial reviews conducted in 2015 and 2018, Nepal had met two of the three criterion related to the human asset index (HAI) and economic vulnerability index (EVI), though it couldn’t meet the per capita income (PCI) criteria. A country must have HAI more that 66 to graduate from LDC. But Nepal has scored 68.7 in 2015, 71.2 in 2018, and 75 in 2021. Likewise, a country must have EVI less than 32 to graduate. Nepal has scored 26.8 in 2015, 28.4 in 2018, and 24.2 in 2021.

A country becomes eligible to graduate from LDC after meeting two of the three criterion but a country can also graduate on the basis of per capita income alone, if it can meet the PCI creteria. The gross national per capita income of a country needs to be at least $1,222 for it to be accorded developing country status, according to the UN. But Nepal’s per capita income stands at $1,027 in 2021, whereas it had $745 in 2018, and $659 in 2015, according to National Planning Commission (NPC) data presented at the UNGA.