The Brief: Paras Kharel on Nepal’s 2026 Graduation from the LDC status: Its Implications and Challenges for the Future

Ep. Br#010

In 2026, Nepal will be graduating from the LDC status after meeting the graduation criteria for three consecutive UN triennials (2015, 2018, 2021) reviews conducted by the Committee for Development Policy (CDP). Nepal has been granted an additional two years to the 3-year transition period generally given by the UN, therefore, making graduation effective from 2026. However, questions have been raised on this proposal as Nepal’s GNI per capita is well below the LDC graduation threshold and also below the LDC average hence, the rising doubts on whether Nepal will be able to sustain the status. Notably, Nepal will have to relinquish the International Support Mechanisms it has been receiving as an LDC. That would mean the loss of preferential market access, stringent rules of origin requirements, and possible increases in tariffs on selected goods leading to significant losses in exports.

In this episode of The Brief, PEI colleague Aslesh sits with Dr. Paras Kharel, where the two talk about the rationale behind categorizing countries as an LDC and discuss Nepal’s graduation from the LDC status and its implications on trade, development assistance and policy space. They then examine the failings of the export sector and the policy changes required to boost the sector. They conclude with some key takeaways from the post-graduation experiences and strategies of a few countries which have graduated and competently sustained the graduation.

Paras Kharel is Executive Director at South Asia Watch on Trade, Economics and Environment (SAWTEE), a Kathmandu-based think tank. He has over 15 years of research experience in trade and development. He has a PhD in Economics (University of Melbourne) with specialization in international trade and applied microeconometrics. His publications include two edited volumes on South Asian cooperation/integration, and articles in peer-reviewed journals such as Review of International Economics, International Economics, and East Asian Economic Review.