Less-Developed Countries (LDCs): Financial Realities & Australia’s Role in 2025

The global economic landscape is shifting rapidly in 2025, and Less-Developed Countries (LDCs) are at the heart of many of these changes. For Australians, understanding LDCs isn’t just an exercise in global awareness—it’s increasingly relevant to our own economic and policy decisions, from trade to climate action and international aid. Here’s what’s shaping the world of LDCs right now, and why it matters for Australia.

What Defines a Less-Developed Country in 2025?

The United Nations classifies LDCs based on criteria like low income, weak human assets, and economic vulnerability. In 2025, there are 45 nations on the LDC list, including countries in Africa, Asia, the Pacific, and the Caribbean. These nations face challenges such as limited industrialisation, high poverty rates, and exposure to external shocks—be it climate, commodity prices, or health crises.

• Income: LDCs typically have a GNI per capita below US$1,088 (as per recent UN thresholds).

• Human Assets: Low education enrolment, high child mortality, and inadequate nutrition remain core issues.

• Economic Vulnerability: Many LDCs are disproportionately impacted by global events, from COVID-19 recovery to climate-related disasters.

However, the landscape isn’t static—Bangladesh, for example, is on track to graduate from LDC status after significant progress in education and export growth.

Key Financial Challenges Facing LDCs Today

2025 brings both new opportunities and persistent hurdles for LDCs. The aftershocks of the pandemic, volatile commodity prices, and escalating climate risks are testing national budgets and development plans. The World Bank’s latest analysis shows that external debt levels for LDCs have risen sharply, with debt servicing costs crowding out social spending.

• Debt Pressure: LDCs’ total external debt stock reached US$1 trillion in 2024, up 10% from 2022.

• Climate Vulnerability: Pacific LDCs like Tuvalu and Kiribati are facing existential risks from rising sea levels, demanding urgent adaptation investment.

• Digital Divide: While global digital adoption accelerates, many LDCs struggle with limited broadband access and digital literacy, hampering financial inclusion.

Some countries, such as Rwanda and Nepal, are making strides with digital banking and mobile payments, but scaling these successes remains a major challenge.

Australia’s Engagement: Trade, Aid, and Policy in 2025

Australia’s relationship with LDCs is multifaceted. As of 2025, Australia’s foreign aid budget prioritises the Indo-Pacific, with a renewed emphasis on climate resilience and health security for its neighbours. Trade preferences and tariff-free access for LDC exports continue under the Enhanced LDC Scheme, supporting economic growth in countries like Cambodia and Laos.

• Development Assistance: The 2025-26 federal budget allocates $4.8 billion to overseas development assistance, with a focus on supporting LDCs in the Pacific and Southeast Asia.

• Climate Finance: Australia has committed $1.3 billion over four years for climate adaptation in the region, with LDCs as major beneficiaries.

• Trade Opportunities: Australian businesses are increasingly looking to LDCs for ethical sourcing and new markets, particularly in agriculture and textiles.

Real-world impact can be seen in Australia’s support for renewable energy projects in the Pacific, and in the rise of Australian companies partnering with social enterprises in LDCs to create sustainable supply chains.

Why LDCs Matter for Australian Households and Businesses

The fate of LDCs is not a distant issue. Their stability and prosperity influence regional security, migration trends, and the price of goods on Australian shelves. As climate risks and global supply chain disruptions increase, the resilience of LDCs becomes intertwined with Australia’s own economic future.

For investors, ethical funds are increasingly channelling capital towards LDC-based projects, while consumers are demanding more transparency on the origin of everyday products. For policymakers, supporting LDCs aligns with Australia’s interests in a stable, prosperous region.