Despite the Covid-19 pandemic, Bhutan is well on track to graduate from the club of Least Developed Countries (LDCs) in 2023, according to the UN’s Committee for Development Policy (CDP).
The CDP, which is responsible for the review of LDCs, held its plenary meeting from February 22 to 26 to review the progress of LDCs, including Bhutan.
The CDP’s LDC Monitoring Report 2021 states that Bhutan will be graduating in 2023, coinciding with the end of the 12th Plan. It adds that the country is making good progress in preparing for a smooth transition strategy and plans for appropriate actions to address challenges posed by the LDC graduation and the impacts of the Covid-19.
Bhutan is the only country to submit its report on the preparation of the smooth transition from the LDC category to a middle-income country. The report stated that Bhutan’s graduation was sustainable and irreversible.
The government had earlier requested the UN to reset Bhutan’s LDC graduation path to help the country regain its grip on a smooth transition from the LDC category due to the Covid-19 pandemic. However, it was learnt that the government did not write to the UN for deferment of the deadline.
Foreign Minister Dr Tandi Dorji said that nothing was “confirmed” yet. “From the government’s side, it is as it is,” he said, but did not elaborate.
The graduation thresholds must be met for any two of the three criteria—Gross National Income (GNI) per capita, Human Assets Index (HAI) and Economic Vulnerability Index (EVI)—in two consecutive triennial reviews.
According to the CDP’s report, Bhutan’s GNI per capita is estimated at USD 2,982 in 2021, which is almost three times the graduation threshold of USD 1,222.
The country’s current HAI score (index of education and health used as an identification criterion for LDCs) is estimated at 79.4, which is above the required score of 66. The EVI is now 25.7, which is well below the graduation threshold of 32.
As per the CDP’s recommendations, the graduation of Bangladesh, Nepal and Laos would be effective in 2026. This means that Bhutan will graduate three years ahead of the three countries.
The report states that challenges to a smooth transition from LDC status include the mobilisation of domestic resources and prudent management of hydropower revenues to substitute for declining foreign grants and maintain macroeconomic stability.
The CDP reviews the list of LDCs and makes recommendations for inclusion in and graduation from the category every three years.
The report stated that Bhutan’s smooth transition strategy is expected to accord special consideration to the challenges that pose a potential hindrance to Bhutan reducing its economic vulnerabilities and adjusting to the loss of LDC-associated benefits. It says that for the future, priority areas are investment in transport and ICT infrastructure.
The focus, therefore, is on improving productive capacity, building the economy’s resilience and meeting the last mile challenges in areas of poverty, health and education. In view of this, the flagship programmes will play a strategic role in complementing sustainable graduation from the LDC category, the report states.
Bhutan’s graduation from the UN’s list of LDC category was endorsed during the 73rd session of the UN General Assembly held in December 2018. However, addressing the 75th UN General Assembly virtually from Thimphu in September last year, Prime Minister Dr Lotay Tshering said that it would be extremely challenging especially for developing countries to reverse their economies.
LDCs have exclusive access to certain international support measures, in particular, in the areas of development assistance and trade. Generally, a country also loses foreign grant aids and technical assistance that are linked to LDC status.
However, graduating from LDC indicates that the country is doing well with a stable political and social setting, which could attract FDI. The country would be more positively viewed by international investors, leading to increased access to international private finance for both the public and private sectors.
There are currently 46 countries on the list of LDCs which is reviewed every three years by the CDP.