Graduation from the LDC status is cited to attract larger foreign direct investment, but there are risk factors and challenges ahead of Bangladesh after the graduation from the LDC category.
The South Asian Network on Economic Modeling (SANEM) made the forecast at a roundtable on Saturday, suggesting that that biggest risk Bangladesh will face after graduation is stagnated growth towards the Sustainable Development Goals (SDGs).
SANEM organised the roundtable discussion on ‘Looking beyond LDC Graduation’ at its office in the city, marking the four years’ publication milestone of its monthly digest ‘Thinking Aloud’.
The roundtable discussed the major benefits and challenges for Bangladesh’s economic, social and environmental conditions while going through the process and the aftermath of graduation from the Least Developed Country (LDC) status.
Dr Selim Raihan, executive director of SANEM and professor of Economics at Dhaka University, chaired the discussion. Senior Research Associates Sunera Saba Khan and Iffat Anjum were also present at the function.
Citing the challenges ahead for the country, they said since Bangladesh has already graduated from the World Bank’s ‘low-income’ category to ‘lower-middle income’ category, the scope for loans at lower interest rates would be limited and this may result in balance-of-payments problems.
Furthermore, graduation could have a more significant effect on access to official development assistance (ODA) and other concessional financing facilities, they added.
“Transition from ‘lower income’ to ‘middle income’ is not an undemanding task. But the country will face comparative high interest rates on loans from developed countries and international agencies with reduced repaying period,” said Dr. Selim Raihan.
He also said many of the exemptions of WTO provisions, including the cut in tariff and subsidies and adherence to intellectual property rights which are currently enjoyed by Bangladesh as an LDC, will no longer be available after 2027.
Therefore, the country has to prepare itself over the next nine years to counter these challenges through effective strategies to sustain its past growth momentum to avoid the middle-income trap, said Dr Selim Raihan.
The country needs to attract large volumes of private sector and foreign direct investment through enhancement of trade competitiveness, improvement in physical and social infrastructures, improvement in the quality of economic and political institutions, reforms in trade policy, monetary and fiscal policies, industrial policy and quality service delivery by the public institutions are very crucial to boosting private sector investment, he suggested.