The government has initiated preparations to prioritize programs in the upcoming fiscal year's budget aimed at addressing the challenges that Nepal could face following its graduation from Least Developed Country (LDC) status in 2026.
Concerns have been raised that Nepal’s current benefits in the global market may diminish after graduation. Post-graduation, Nepal will lose certain trade-related intellectual property advantages which could negatively affect Nepali products. However, government officials believe that proactive policy and diplomatic efforts could help mitigate these risks and maintain existing benefits.
In 2021, the UN General Assembly approved Nepal’s transition from an LDC to a developing country, based on the recommendation of the United Nations Committee for Development Policy.
The Ministry of Finance has been engaging in discussions with relevant agencies to integrate the roadmap for Nepal’s graduation into the upcoming fiscal year’s budget. Intensive consultations have taken place between the National Planning Commission, the Ministry of Industry, Commerce and Supplies, and the Ministry of Finance on the issue.
Officials insist that there won’t be much impact from waiver of facilities post-graduation as it would not affect Nepal’s exports to India, its largest trading partner, which accounts for two-thirds of the country’s total trade. As a close neighbor, Nepal enjoys special concessions under bilateral agreements, which will remain intact even after graduation.
Nepal’s exports to China, where it enjoys duty-free access for several products, will also remain unaffected. Although current exports to China are minimal, the northern neighbor holds significant potential as a future export market for Nepal.
However, exports to other markets, such as the United States, the European Union (EU) and the United Kingdom—where Nepal currently benefits from LDC privileges—could face problems, according to finance ministry officials. They added that grant assistance could also diminish gradually post-graduation.
The finance ministry has stated that preparations are already underway to formulate new policies to address these issues. The goal is to align the graduation process with the budget’s objectives for sustainable development, a finance ministry official said.
During recent discussions, officials underlined the need to develop policies, plans and programs that will ensure the upcoming fiscal year 2025-26 is both smooth and sustainable and aligns with Nepal’s post-graduation strategies.
The finance ministry plans to support sustainable economic growth and job creation through fiscal policy, stable monetary policy and the effective operation of development assistance. Additionally, trade analysis and enhancing capacity and financial access for high-return projects are also among the ministry’s key priorities.
The criteria for LDC graduation include per capita gross national income, human asset index and economic and environmental vulnerability indicators, among others.
Officials say Nepal is expected to benefit from strengthened access to development and business investments, new trade and economic partnerships, sustainable development, enhanced national image, and increased credibility, among others, post-graduation.
