Nepal’s new government is preparing to formally request the United Nations to postpone its scheduled graduation from Least Developed Country status by three years, pushing the transition from November 2026 to November 2029.
The Balendra Shah government will reportedly send a formal letter seeking the deferral, citing concerns over the loss of preferential trade facilities Nepal currently enjoys, rising economic vulnerabilities linked to tensions in West Asia, Bangladesh’s decision to pursue a similar delay, and mounting pressure from Nepal’s private sector. Prime Minister Shah and Finance Minister Swarnim Wagle have discussed the matter and agreed to send the letter.
Nepal’s National Planning Commission made the decision on May 12, just over six months before the scheduled graduation date. Nepal has been on the UN’s LDC list since 1971. Despite setbacks, including the 2015 earthquake and the COVID-19 pandemic, it met all graduation criteria in the 2021 UN triennial review, leading to a five-year preparatory period with graduation set for November 2026.
The case for delay rests on a mix of structural weakness and recent shocks. Nepal has never met the income criterion and is on track to become the only country to graduate without crossing the minimum income threshold of US$1,306 per capita. In the most recent review, it reportedly fell short by just six dollars. Nepal was placed on the Financial Action Task Force’s grey list in February 2025, compounding concerns about the investment climate. The September 2025 unrest added further damage, with the total economic impact estimated at around Rs 3 trillion, roughly equivalent to one and a half years of Nepal’s national budget.
A study by the International Trade Centre1 estimates that Nepal’s exports could decline by around 4% after graduation. Free trade agreement negotiations with key partners have yet to begin, and Nepal still needs to ratify several international conventions to retain duty-free access to the EU market. The LDC Graduation Smooth Transition Strategy published by the National Planning Commission itself shows that Nepal still has significant implementation work left.
Nepal is not alone in seeking more time. Bangladesh, also scheduled to graduate in November 2026, formally sought deferral until 2029 in September 2025, citing political and economic disruption, and had estimated that immediate graduation could cost it approximately US$8 billion in annual export revenue.
Nepal first became eligible to graduate in 2015 but deferred due to the earthquake, then again in 2018, before accepting a five-year preparatory period in 2021. Critics note that successive governments failed to use that additional time to strengthen the country’s readiness, and analysts say the latest request risks continuing a pattern of deferral without structural reform.
Read our contributor Kushal Pokharel’s analysis around the debate on whether Nepal should graduate or not.