22 Trade Insight Vol. 11, No. 1, 2015 LDC graduaƟon D espite its strategic location, Af- ghanistan is among the poorest in the world 1 and belongs to a group of the least developed countries (LDC). According to 2014 estimates, Af- ghanistan’s per capita income is about US$694 and the country’s performance in most human development indica- tors is not at par with its neighbours in South Asia 2 . The road to graduation from the LDC status for Afghanistan is riddled with challenges. Extreme poverty remains widespread and economic growth continues to be uneven, fragile and vulnerable to shocks. The coun- try’s share in regional and world trade is negligible, with exports heavily dependent on a handful of primary products. As a result, the country has not been able to benefit from the global and the regional growth. The country is heavily dependent on donors’ support to meet its develop- ment as well as regular expenditures. However, donor support is expected to decline with the security transition to Afghan forces, which could severely limit the government’s ability to sup- port socio-economic development. In war torn Afghanistan where health infrastructure is in shambles and the mortality rate for children younger than 5 years is 199 deaths per 1000 live birth 3 , the second highest in the world, any decline in international aid will have devastating impact on the country’s goal to graduate from the LDC status. In addition, years of war and armed conflict has deprived mil- lions from education and forced many to emigrate, which in turn has had deleterious impact on public adminis- tration and the quality of civil service employees, consequently affecting the effectiveness of socio-economic policies. If Afghanistan is to graduate from the LDC status in the years to come, the country needs to work exten- sively towards meeting the graduation thresholds of all three criteria, namely, GNI per capita, human asset index (HAI) and economic vulnerability index (EVI). Regrettably, the current state of socio-economic conditions in Afghanistan continues to exert resistance to the strides made towards LDC graduation. While Afghanistan has undoubtedly made significant progress in the last 13 years with re- gard to per capita income, the country still has a long way to go before meet- ing the income graduation threshold. In this regard, the Afghan government needs to develop investment friendly environment, promote good gover- nance, develop financial discipline and improve the domestic revenue collec- tion to ensure further improvements in per capita income. Meanwhile, the evaluation of HAI reveals that Afghanistan by far lags behind the HAI graduation threshold. Though the government has invested heavily to improve health care and education, progress has been slow. Despite ongoing efforts, the lit- eracy rate in Afghanistan is only 23.5 percent, which is one of the lowest among developing countries. Hence, it is obvious that the country requires more time and investment to improve its HAI. It can be argued that Afghani- stan requires no less than 7 to 10 years to improve its social indicators in order to meet the minimum require- ments for graduation. Similarly, Afghanistan’s performance on EVI 4 is not impressive either. Small economic size, high dependence on imports and increasing vulnerability to climate change impacts, among others, makes the economy highly vulnerable to external economic shocks. Thus, in order to meet the EVI graduation requirement in a sustainable manner, Afghanistan must continue to focus on policy reforms, investments in infra- structure, irrigation and agricultural development, private sector promo- tion, and so on. A long journey to graduate for Afghanistan To graduate to a developing country from LDC status, Afghanistan needs to work extensively towards meeting the graduation thresholds of all three criteria, namely, GNI per capita, hu- man asset index and economic vulnerability index. Mohammad Najeeb Azizi