Nepal’s graduation from the Least Developed Country (LDC) category in 2026 is more than a milestone: it is a stress test of whether the country can sustain growth without the cushion of preferential support. We demonstrate that Nepal’s longstanding structural weaknesses, including reliance on remittances, weak capital investment, and a narrow export base, are now entering a more vulnerable policy environment post-LDC. Critically, these vulnerabilities need to be addressed before they become permanent constraints. We argue that this will require fiscal discipline anchored to credible investment, digital transformation that enables regional integration, and subnational competitiveness beyond aid dependency. Looking ahead, Nepal’s transition can draw on the experiences of its regional peers, while at the same time serving as a low-stakes stress test of how other South and Southeast Asian LDCs may manage their own graduation.
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