Download Graduation from LDC

Contents
Acknowledgments .......................................................................................................................... 1
Abstract ........................................................................................................................................... 2
1.
Introduction ............................................................................................................................. 3
2.
Report Preliminaries ................................................................................................................ 3
2.1 Origin .................................................................................................................................... 3
2.2 Objective ............................................................................................................................... 3
2.3 Scope ..................................................................................................................................... 4
2.4 Literature Review .................................................................................................................. 4
2.5 Methodology ......................................................................................................................... 5
2.6 Limitations ............................................................................................................................ 6
3.
Report Analysis ....................................................................................................................... 6
3.1 LDC Graduation Process ....................................................................................................... 6
3.1.1 Factors Contributing to LDC Graduation ....................................................................... 7
3.2 The Role of Bangladesh Bank ............................................................................................... 9
4.
Conclusion ............................................................................................................................. 14
5.
Recommendations ................................................................................................................. 15
0
Acknowledgments
1
Abstract
Bangladesh's graduation from the Least Developed Countries (LDC) category marks a significant
achievement, reflecting the country's progress in economic growth, human development, and
reduced economic vulnerability. This paper examines the factors contributing to Bangladesh's
LDC graduation, including robust economic growth driven by the manufacturing and services
sectors, improvements in healthcare, education, and gender equality, and a diversified export base.
Furthermore, the pivotal role of Bangladesh Bank, the country's central bank, is explored in terms
of ensuring monetary and financial stability, implementing prudent economic policies, regulating
the financial sector, and promoting financial inclusion. The central bank's support for exportoriented industries and efforts to improve the financial sector's efficiency, stability, and resilience
through regulatory measures, such as implementing Basel III standards and promoting good
governance and transparency, are also discussed. As Bangladesh navigates the challenges and
opportunities of its LDC graduation, sustained efforts from the government, Bangladesh Bank, and
other stakeholders will be crucial in maintaining socio-economic development momentum,
enhancing resilience to economic shocks, and ensuring sustainable and inclusive growth.
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1. Introduction
In "Navigating Bangladesh's Transition: LDC Graduation and the Pivotal Role of Bangladesh
Bank," the article delves into the significant achievement of Bangladesh graduating from a Least
Developed Country (LDC) to a Developing Country (United Nations, 2021). This remarkable
transition signifies progress in various socio-economic indicators, which have been facilitated
through the strategic efforts and policy implementations of the Bangladesh Bank (Rahman &
Ahmed, 2020) toward production, sets the stage for a comprehensive analysis of the LDC
graduation process, the key factors contributing to Bangladesh's success, and the central bank's
crucial role in steering the country towards this milestone. The article draws from various sources,
including United Nations (UN) reports and scholarly articles, to provide a well-rounded
understanding of Bangladesh's journey toward LDC graduation (CDP, 2021; Zaman & Amin,
2021).
2. Report Preliminaries
2.1 Origin
2.2 Objective
1. Provide an overview of the post-graduation challenges and opportunities for Bangladesh.
2. Evaluate the impact of graduation on trade, investment, employment, and poverty
reduction in Bangladesh.
3. Investigate the measures Bangladesh Bank can take to address the challenges and ensure
economic stability and growth.
4. Highlight the significance of Bangladesh's graduation from the LDC block in the context
of sustainable development.
5. Offer insights and recommendations for policymakers to navigate the challenges and
capitalize on the opportunities presented by Bangladesh's graduation from the LDC block.
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2.3 Scope
1. Identify the challenges Bangladesh may face after it graduates from the LDC block.
2. Analyse the economic and social implications of Bangladesh's graduation from the LDC
block.
3. Assess the potential opportunities that Bangladesh's graduation can create for sustainable
development.
4. Examine the role of Bangladesh Bank in ensuring economic stability and growth in the
face of these challenges.
2.4 Literature Review
Bangladesh's graduation from the Least Developed Countries (LDC) category has been widely
discussed in the literature, with many researchers examining the factors contributing to this
achievement. The challenges may arise during the transition, and the role of various stakeholders,
notably the Bangladesh Bank, in supporting the graduation process.
1. Factors Contributing to LDC Graduation
The text discusses several studies that have identified consistent economic growth, improvements
in human development, and reduced economic vulnerability as critical drivers behind Bangladesh's
LDC graduation (Rahman & Ahmed, 2020; Zaman & Amin, 2021). The growth of the
manufacturing sector, particularly the ready-made garments industry, has played a crucial role in
driving the country's economic growth, according to the Asian Development Bank (2020).
Furthermore, significant strides in healthcare, education, and gender equality have contributed to
better Human Assets Index (HAI) scores, as the UNDP (2021) noted. Finally, the text states that
the country's diversified export base, reduced reliance on foreign aid, and increased resilience to
economic shocks have improved its Economic Vulnerability Index (EVI) (Rahman & Ahmed,
2020).
2. Challenges and Opportunities Post-LDC Graduation
The literature on Bangladesh's LDC graduation also discusses the challenges and opportunities
that may arise during the transition, including sustainable economic growth, coping with the loss
of preferential trade benefits, attracting foreign investment, and ensuring environmental
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sustainability (Rahman & Ahmed, 2020; Zaman & Amin, 2021). To address these challenges,
researchers recommend strategic policy adoption and leveraging opportunities such as exploring
new markets, enhancing competitiveness, and investing in human capital and infrastructure
(Bhattacharya & Moazzem, 2021).
3. The Pivotal Role of Bangladesh Bank
The literature highlights the important role Bangladesh Bank, the country's central bank, played in
ensuring monetary and financial stability during the LDC graduation process. The central bank has
implemented prudent economic policies, regulated the financial sector, and promoted financial
inclusion to support the transition. Additionally, Bangladesh Bank has taken several policy
measures to support export-oriented industries and improve the financial sector's efficiency,
stability, and resilience. Overall, the literature provides valuable insights into the factors behind
Bangladesh's remarkable progress, its challenges and opportunities during the transition, and the
central bank's critical role in supporting the graduation process. As Bangladesh continues to
navigate this transition, ongoing research and policy analysis will be crucial for addressing
emerging challenges and promoting sustainable and inclusive growth opportunities (Rahman &
Ahmed, 2020; Chowdhury & Hossain, 2020; Bangladesh Bank, 2021; Chowdhury, 2019).
2.5 Methodology
This paper aims to analyze the challenges and opportunities presented by Bangladesh's graduation
from the LDC block and the role of Bangladesh Bank in addressing these challenges. The
methodology used to conduct this research includes a comprehensive review of existing literature
on the topic.

The literature review was conducted using a systematic search approach, which involved
searching various academic databases, including JSTOR, Google Scholar, and
EBSCOhost.

Each relevant report was scrutinized and reviewed thoroughly, taking note of critical
findings and recommendations related to the topic. The papers were then categorized based
on the main themes that emerged from the review, including trade, employment, poverty
reduction, and the role of the Bangladesh Bank.
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
The literature review analysis involved synthesizing the information gathered from the
articles to provide a comprehensive overview of the challenges and opportunities presented
by Bangladesh's graduation from the LDC block and the role of Bangladesh Bank in
addressing these challenges.
2.6 Limitations
Limitations of this paper include the reliance on secondary sources of data and the potential for
bias in selecting articles for the literature review. To mitigate these limitations, I have used a
systematic approach to identify relevant themes and included a range of perspectives in the analysis
to ensure a balanced view of the topic.
3. Report Analysis
3.1 LDC Graduation Process
The United Nations Committee for Development Policy (CDP) is responsible for reviewing the
progress of LDCs and recommending countries for graduation (United Nations, 2021). To
graduate, a country must meet at least two of the following three criteria in two consecutive
triennial reviews (CDP, 2021):
Figure 1: LDC Graduation Assessment for Bangladesh

Gross National Income (GNI) per capita

Human Assets Index (HAI)

Economic Vulnerability Index (EVI)
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In the case of Bangladesh, it met all three criteria during the 2018 and 2021 triennial reviews,
leading to the recommendation for graduation (United Nations, 2021).
3.1.1 Factors Contributing to LDC Graduation
Several factors contributed to Bangladesh's LDC graduation, including:
I.
Robust Economic Growth:
Bangladesh has sustained impressive economic growth, surpassing 6% annually over the past
decade. It is driven primarily by the ready-made garments industry, which accounts for 80% of its
exports and employs millions, especially women. Investments in infrastructure and FDI have
further boosted the manufacturing sector. The services sector has also experienced significant
growth, particularly in ICT, finance, and retail, with the government's "Digital Bangladesh"
initiative promoting innovation (Durlauf & Blume, 2008; World Bank, 2021; Rahman & Ahmed,
2020; Asian Development Bank, 2020; Zaman & Amin, 2021; Islam, 2021).
Additionally, the services sector has experienced substantial growth, driven by the expansion of
information and communication technology (ICT), finance, and retail sectors (Rahman & Ahmed,
2020). The government's "Digital Bangladesh" initiative has also played a crucial role in
promoting the growth of the ICT sector and fostering innovation (Islam, 2021).
II.
Human Development:
Human development refers to the significant strides Bangladesh has made in improving various
aspects of human well-being, such as healthcare, education, and gender equality (Zaman & Amin,
2021). These efforts have contributed to a better Human Assets Index (HAI) score, one of the three
criteria for LDC graduation (CDP, 2021). The HAI considers undernourishment, child mortality,
secondary school enrollment, and adult literacy rates (CDP, 2021).
Healthcare: Bangladesh has made considerable progress in reducing child mortality rates and
improving maternal health (World Bank, 2021). The country's successful immunization program
and investments in primary healthcare facilities have contributed to these improvements (Ahmed
et al., 2020).
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Education: Bangladesh has made significant gains in increasing primary and secondary school
enrollment, particularly for girls (UNICEF, 2020). The government has implemented various
initiatives, such as providing free textbooks and stipends for girls, which have helped boost school
attendance and literacy rates (World Bank, 2020).
Gender Equality: Bangladesh has made remarkable progress in promoting gender equality,
evidenced by its improved ranking on the Gender Development Index (GDI) (UNDP, 2021). The
growth of the RMG industry, which employs millions of women, has contributed to women's
economic empowerment (Asian Development Bank, 2020).
III.
Reduced Economic Vulnerability:
Figure 2: LDC Graduation & Bangladesh’s apparel exports to the EU
Bangladesh has made progress in reducing economic vulnerability, as indicated by improvements
in its Economic Vulnerability Index (EVI), which measures a country's susceptibility to economic
shocks and crises. Factors contributing to this progress include a diversified export base, reduced
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reliance on foreign aid, and increased resilience to economic shocks. The country's export sector
has diversified beyond ready-made garments to include pharmaceuticals, IT services, and
agricultural products, making it less susceptible to fluctuations in demand for specific products or
sectors. Bangladesh has also reduced its dependency on external financial support through
increased domestic resource mobilization.
Additionally, the government has implemented policies to enhance macroeconomic stability, such
as prudent fiscal and monetary policies and building disaster risk management capacity. Thisped
maintain low inflation rates and exchange rate stability. (CDP, 2021; UNCTAD, 2020; Rahman &
Ahmed, 2020; Zaman & Amin, 2021; Ahmed & Hasan, 2020; Bangladesh Bank, 2021; World
Bank, 2019). Bangladesh's reduced economic vulnerability can be attributed to its diversified
export base, decreased dependence on foreign aid, and increased resilience to economic shocks.
3.2 The Role of Bangladesh Bank
Bangladesh Bank played a crucial role in facilitating the country's LDC graduation through various
policy initiatives and interventions:
Monetary and financial stability:
Bangladesh Bank, the country's central bank, is critical in ensuring monetary and financial stability
during the LDC graduation process. It achieves this through several fundamental mechanisms,
including implementing prudent economic policies, regulating the financial sector, and promoting
financial inclusion.
1. Implementing prudent monetary policies: Bangladesh Bank formulates and implements
financial policies to ensure price stability and sustainable economic growth. The central
bank manages the money supply, interest rates, and foreign exchange reserves to maintain
low inflation rates and exchange rate stability, which are crucial for economic resilience
and growth during the LDC graduation process (Bangladesh Bank, 2021; Rahman &
Ahmed, 2020).
2. Regulating the financial sector: Bangladesh Bank regulates and supervises banks and
financial institutions to ensure the stability and soundness of the financial system. By
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setting prudential regulations, monitoring compliance, and taking corrective measures
when necessary, the central bank fosters a stable and robust financial sector, which is
essential for maintaining investor confidence and attracting foreign direct investment
during the LDC graduation process (Bangladesh Bank, 2021; Zaman & Amin, 2021).
3. Promoting financial inclusion: Bangladesh Bank promotes financial inclusion by
implementing policies and initiatives to expand access to financial services for the
underserved and unbanked population, including agent banking, mobile financial services,
and targeted credit programs for SMEs and marginalized groups. Financial inclusion is
essential for achieving socioeconomic development targets required for LDC graduation
and inclusive economic growth (Alliance for Financial Inclusion, 2019; Rahman & Ahmed,
2020; Bangladesh Bank, 2021).
Bangladesh Bank ensures monetary and financial stability during the LDC graduation process by
implementing prudent monetary policies, regulating the financial sector, and promoting financial
inclusion. These efforts foster a stable macroeconomic environment critical for sustainable
economic growth and development.
Access to Finance:
Bangladesh Bank has implemented various policies and initiatives to enhance financial inclusion
to make credit and financial services more accessible to small and medium-sized enterprises
(SMEs) and marginalized communities. These efforts have stimulated economic growth, job
creation, and poverty reduction in the country.
1. Targeted Credit Programs: Bangladesh Bank has introduced targeted credit programs,
such as the "Refinance Scheme for Small Enterprises" and the "Refinance Scheme for
Women Entrepreneurs," to support SMEs and marginalized communities. These programs
provide low-cost credit to eligible businesses, helping them expand their operations, create
jobs, and contribute to economic growth (Bangladesh Bank, 2021; Rahman & Ahmed,
2020).
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2. Agent Banking: Bangladesh Bank introduced agent banking regulations in 2013 to expand
financial services to underserved and unbanked populations. The initiative allows banks to
partner with third-party agents to provide essential banking services in remote and rural
areas, significantly increasing access to financial services for marginalized communities.
This has promoted financial inclusion and reduced poverty in Bangladesh (Bangladesh
Bank, 2013; Sultana & Hasan, 2018).
3. Mobile Financial Services: Bangladesh Bank has supported the growth of mobile
financial services, which has expanded access to financial services for millions of
unbanked and underbanked individuals in rural areas of Bangladesh. This initiative has
contributed to poverty reduction, increased savings, greater access to credit, and improved
financial resilience, ultimately promoting economic growth. (Hossain & Roy, 2019;
Rahman & Ahmed, 2020)
Bangladesh Bank's policies and initiatives to enhance financial inclusion, such as targeted credit
programs, agent banking, and mobile financial services, have made credit and financial services
more accessible to SMEs and marginalized communities. These efforts have helped stimulate
economic growth, job creation, and poverty reduction in Bangladesh.
Green Financing:
Bangladesh Bank introduced green financing policies to encourage banks and financial institutions
to provide loans for environmentally sustainable projects, such as renewable energy, energy
efficiency, and pollution prevention initiatives. The "Policy Guidelines for Green Banking"
introduced in 2011 provide a framework for banks to integrate environmental considerations into
their operations. The central bank also established a refinance scheme for green projects, offering
low-cost funds to financial institutions for financing environmentally sustainable projects. These
policies have supported the country's efforts to mitigate climate change impacts, reduce
dependence on fossil fuels, and enhance its capacity to cope with the effects of climate change
(Bangladesh Bank, 2015; Hossain, 2018; Uddin & Biswas, 2020).
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Figure 3: Green Banking-A Perspective on Bangladesh
Emphasis on Export-Oriented Industries:
The central bank of Bangladesh, Bangladesh Bank, has implemented policy measures to support
export-oriented industries, particularly the ready-made garments (RMG) sector. This significantly
contributes to the country's GDP growth and foreign exchange earnings (Asian Development
Bank, 2020). The policy measures aimed to enhance the competitiveness of export-oriented
industries, boost export earnings and support the overall economic growth of Bangladesh (Rahman
& Ahmed, 2020).
Bangladesh Bank has introduced concessional lending rates for export-oriented industries,
including the RMG sector, through which the central bank aims to reduce the cost of borrowing
and encourage investments in productivity-enhancing technologies and practices. This, in turn,
helps businesses become more competitive in international markets, leading to increased exports
(Bangladesh Bank, 2019; Rahman & Ahmed, 2020).
Through its Export Credit Guarantee Scheme (ECGS), Bangladesh Bank provides guarantees to
banks and other financial institutions extending credit to exporters, encouraging banks to lend to
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export-oriented businesses that may face higher risks due to the uncertainty of global markets. By
mitigating these risks, the central bank facilitates access to finance for exporters, helping them
expand their businesses and boost export earnings (Bangladesh Bank, 2021; Chowdhury, 2019).
Figure 4: Export-import of Bangladesh
Bangladesh Bank focuses on strengthening the capacity of export-oriented industries by providing
training, technical assistance, and support for innovation. These capacity-building initiatives help
businesses in the RMG sector and other export-oriented industries to adopt best practices, improve
productivity, and enhance their competitiveness in the global market (Bangladesh Bank, 2021;
Rahman & Ahmed, 2020).
In summary, Bangladesh Bbank’s policy measures, including concessional lending rates, export
credit guarantees, and business capacity building, have been introduced to support export-oriented
industries such as the RMG sector, contributing to their competitiveness and growth, which plays
a crucial role in the overall economic development of Bangladesh.
4. Strengthening the Financial Sector:
Bangladesh Bank has actively worked on improving the financial sector's efficiency, stability, and
resilience through regulatory measures and initiatives, which are crucial for sustainable economic
growth and development during the LDC graduation process (Rahman & Ahmed, 2020).
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1. Implementing Basel III Standards: Bangladesh Bank has been implementing the Basel
III standards, a set of international regulatory frameworks designed to strengthen the
regulation, supervision, and risk management of banks (Bangladesh Bank, 2021a). These
standards aim to enhance the resilience of banks by ensuring that they maintain adequate
capital and liquidity levels and adopt robust risk management practices (BCBS, 2011). By
adopting these standards, Bangladesh Bank fosters a more stable and robust banking sector,
essential for maintaining investor confidence and attracting foreign direct investment
(Rahman & Ahmed, 2020).
2. Promoting Good Governance and Transparency: Bangladesh Bank has focused on
enhancing the governance and transparency of the financial sector by implementing
corporate governance guidelines for banks and other financial institutions, emphasizing the
importance of sound governance practices, effective risk management systems, and solid
internal controls (Bangladesh Bank, 2021b; Bangladesh Bank, 2013). By promoting good
governance and transparency, the central bank helps to build trust in the financial sector,
which is crucial for fostering a stable and efficient financial system (Chowdhury &
Hossain, 2020).
These efforts, including implementing regulatory measures such as Basel III standards,
foster a more robust and sound financial system that supports sustainable economic growth
and development during the LDC graduation process (Bangladesh Bank, 2021b).
4. Conclusion
Bangladesh's LDC graduation is a significant milestone that reflects the country's remarkable
progress in economic growth, human development, and reduced economic vulnerability. The
Bangladesh Bank has played a crucial role in supporting the LDC graduation process by ensuring
monetary and financial stability, implementing prudent economic policies, regulating the financial
sector, and promoting financial inclusion (Bangladesh Bank, 2021; Rahman & Ahmed, 2020). The
central bank has also implemented various policy measures to support export-oriented industries
and improve the financial sector's efficiency, stability, and resilience (Bangladesh Bank, 2021).
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As Bangladesh faces new challenges and opportunities post-LDC graduation, sustained efforts
from the government, Bangladesh Bank, and other stakeholders will be necessary to ensure
sustainable and inclusive growth for all citizens (Rahman & Ahmed, 2020). By building on its past
successes and addressing emerging challenges, Bangladesh can continue its journey toward
becoming a developed and prosperous nation (UN, 2021).
5. Recommendations
Following are some major recommendations for addressing the challenges and opportunities
presented by Bangladesh's graduation from the LDC block and the role of Bangladesh Bank:

The central bank should promote export diversification and support efforts to
increase trade with non-traditional partners.

It should prioritize job creation by providing credit to SMEs, supporting
entrepreneurship, and promoting the formalization of the economy.

Bangladesh Bank can enhance financial inclusion by increasing access to credit and
other financial services, particularly for disadvantaged groups.

The central bank should address income inequality and social exclusion by ensuring
that credit and other financial services are accessible to all segments of society,
including women and marginalized communities, and supporting initiatives to
improve access to education and healthcare.

Bangladesh
Bank
should
undertake
reforms
to
improve
transparency,
accountability, and independence, investing in training and capacity-building to
remain an effective institution (Bangladesh Bank, 2021).
Overall, the above recommendations can help Bangladesh and Bangladesh Bank address the
challenges and opportunities presented by graduation from the LDC block and promote sustainable
and inclusive economic growth and development.
15
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