Beyond smooth transition: Botswana's post‐ LDC graduation growth resilience and policy lessons for graduating LDCs

Abstract Motivation Graduating from least developed country (LDC) status can create economic vulnerabilities due to the gradual withdrawal of LDC‐specific international support measures. Although many countries have graduated, the LDC literature has focused on the support provided by the status or the potential losses after graduation and empirical evidence examining the long‐term economic performance and resilience to external shocks of graduating countries is limited. The experience of Botswana, the first country to graduate from LDC, offers a unique example for evaluating whether graduation leads to a structural break in economic performance. Purpose The purpose of this study is to investigate how Botswana maintained its growth resilience after graduating from LDC status in 1994 and what policy recommendations this experience can offer to countries graduating in the future. More specifically, this study aims to assess whether Botswana experienced a structural shift in its economic trajectory following the LDC graduation and whether the country made a smooth transition to the post‐graduation process. Approach and Methods This study applies the multiple structural break test developed by Bai and Perron (1998) to identify key turning points in Botswana's economic trajectory. Since Botswana meets the LDC graduation requirement solely through gross domestic product (GDP) per capita, the study uses annual data on GDP per capita and gross domestic savings as a percentage of GDP from 1960 to 2022, focusing on both income performance and local savings capacity. The structural break test aims to determine whether Botswana's LDC graduation in 1994 caused a structural disruption or a smooth transition in the economy. Findings The first break after graduation occurred in 2008, 14 years after Botswana graduated from the LDC, coinciding with the global economic crisis. This indicates that graduation did not lead to a sudden structural disruption in the country's economic trajectory and that the graduation process was relatively “smooth”. Policy Implications Botswana's experience provides important lessons for countries approaching the same status. The findings demonstrate the necessity of supporting macroeconomic stability with fiscal discipline and long‐term development plans to sustain post‐graduation growth resilience. In this respect, Botswana can serve as a useful policy reference for countries seeking a smooth transition after LDC graduation.