Nepal has sent a formal letter to the United Nations to push back the deadline for upgrading from a least developed country (LDC) to a developing country by 3 years. According to information given at a regular press conference organized by the Ministry of Foreign Affairs on Friday, the date of the upgrade, which was earlier set for November 2026, has now been requested to be pushed back to November 2029. This is the second time that Nepal has postponed the process of upgrading to a developing country for further preparation. The ministry has clarified that Foreign Minister Shishir Khanal had already sent a formal letter to the Chairman of the United Nations Committee on Development Policy (CDP) on May 13. (Earlier, a Finance Ministry official had claimed to have sent a letter to Kantipur on May 17.) ‘The Nepal government has initiated a formal process to immediately postpone the scheduled upgrade from least developed country,’ the ministry’s draft statement said. The government has put forward five main reasons for pushing back the upgrade. The ministry has stated that the decision had to be taken due to the impact on Nepal’s economy due to regional conflicts and disruptions in global supply chains and the impact on remittance inflows, which are the main source of foreign exchange. The World Bank has also projected that Nepal’s economic growth rate will be limited to 2.3 percent in 2026. The main reason for this is the situation. ‘After upgrading from a least developed country to a developing country, Nepal is at risk of losing the facilities it currently enjoys, including duty-free and quota-free market access, and as a result, employment in the productive sector is estimated to decline by up to 35 percent,’ the statement said. ‘The smooth exit strategy adopted by Nepal has been implemented later than expected due to various reasons.’ The ministry has admitted that the implementation of the smooth exit strategy has been delayed as expected.    

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These are the 5 reasons given by the government:

– Regional conflict and impact on global supply chains, low economic growth projection

– Risk of loss of duty-free and quota-free market access and 35 percent reduction in employment

– Delay in implementation of the smooth exit strategy

– Geopolitical tensions, climate change and slow economic recovery after COVID

– Impact on remittances and increase in fuel and food prices

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The press statement mentions that geopolitical tensions and the effects of climate change have created additional challenges while the economic recovery after the COVID-19 pandemic has not fully stabilized. It has been pointed out that Nepal will lose the trade facilities it currently enjoys and that this will cause a major setback to the productive sector.

The ministry has mentioned that the recent tensions in West Asia have increased the prices of Nepal's fuel, food and fertilizers, and this has had a negative impact on the overall economy as well as the tourism industry. As it seems that timely upgrading may be counterproductive amid such a multilateral crisis, the government has written to the UN requesting an additional three years.